Web Ad Firm Learns People Don't Like Spying

Ad firm NebuAd rushed into business with a massive blind spot. The irony is that Congress caved into terrorism fear-mongering and voted to allow the government to do precisely what it frets about NebuAd doing.
The last couple of weeks have been pretty bad for the folks over at the behavioral targeting and advertising company NebuAd.

During some highly contentious hearings on Capitol Hill, it seems to have come as a shock and surprise to the executives at NebuAd that people might have a problem with having their Internet connection spied upon for advertising purposes.

NebuAd, a Redwood City, Calif.-based start-up has been raked over the coals on both sides of Capitol Hill in recent weeks for its business model, which is based upon the monitoring of consumer broadband connections to build activity profiles and to deliver better targeted advertisements.

Several members of Congress suggested that NebuAd's monitoring and analysis of consumers' Internet connections was only permissible if consumers gave affirmative consent and "opted-in" for the service.

There were no news reports that the skull of NebuAd's CEO, Robert Dykes, exploded at that suggestion. But it certainly could have, because Dykes knows just as well as anybody else that very few people would be willing to be spied upon without some real tangible benefit coming in return.

When I first read about NebuAd's plight, I could only roll my eyes and mutter, "here we go again!" Sure enough, the more I read about them, the more I realized that they were heading down an ugly road.

You see, this is a line of business that I know a thing or two about. Nearly a decade ago, I worked as the first Chief Privacy Officer for an Internet advertising start-up called AllAdvantage.

Even in those ancient times (when the Internet, in some places, still was little more than a 'series of tubes'), there were very few consumers begging to be spied upon in the vain hope that they'd get to see better targeted ads. The ranks of those suffering from too little advertising are even smaller today. Knowing this, at AllAdvantage we decided that the one way to get people to let us "spy" on them was to pay them for the privilege. So we built a system that rewarded people for the time they allowed us to look over their shoulder and build a data profile. In 18 short months, more than 10 million people around the world gave us permission, and in turn we paid out more than $100 million to them before the bottom fell out of the dotcom advertising market in early 2001.

The other thing we knew, and frankly it was the reason they hired me away from a law firm in Washington, DC, was that, even with a permission and compensation-based system, and even with the strongest privacy protections in place, politicians and policy-makers would not look kindly on a business that seemed to be built upon spying on people.

So even before I had moved into my office at AllAdvantage, I had a meeting with one of the best tech-industry lobbyists in Washington to feel him out about the best approaches to take in order to head off the inevitable firestorm.

Before AllAdvantage even had its name painted on its office door, our lobbyist Robb Watters was helping us to understand the lay of the land in terms of how Internet privacy was being viewed, and how to help shape the discussion so that our company was perceived to be driving efforts to protect consumers and not seen as trying to pull a fast one.

As a result of this strategy, AllAdvantage quickly became recognized as a thought-leader while many of our competitors would go on to be branded as 'spyware' companies and hounded out of business.

Unfortunately, NebuAd seems to be learning, a little too late, that when you set up shop squarely in the middle of a big bear trap, your business plan needs to include – from the outset – a strategy for when the trap starts to close around you.

Also unfortunate is the fact that NebuAd is no different than too many other companies in the Internet space in that they are so focused on the internals of their business that they fail to consider external factors like laws, regulations, and politics.

Perhaps it's because I grew up in Washington, worked as a lobbyist, and trained as a lawyer. But I still marvel at how, all too often, start-ups will rush headlong into their business with a blind spot so huge that it prevents them from seeing the entire United States government.

The irony of course is that with all the bloviating from various members of Congress about the sanctity of consumers' private communications, this same Congress caved into terrorism fear-mongering and voted to allow the government to do precisely what it frets about NebuAd doing. Luckily, such hypocrisy is well understood out here in Silicon Valley, and NebuAd may yet find a profitable exit from this mess.

I wonder how much Al-Qaida would pay for delivering ads to suspected terrorists found via illegal warrantless wiretaps?

Tags: security, consumer, privacy, policy, Congress

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