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Privacy concerns may derail Web-tracking venture

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Associated Press / September 1, 2008
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NEW YORK - It sounded like a winning proposition - free money - for Internet access providers. By tracking their subscribers' Web surfing habits, they could help deliver ads targeted to consumers' interests, and claim a share of the burgeoning online advertising market dominated by Internet search companies like Google and Yahoo.

But slow-building privacy storm moved in on NebuAd Inc., the Silicon Valley start-up that can facilitate the Web tracking. And its potential partners, the Internet service providers, failed to make the case that they should be in the ad business at all, rather than simply being the pipes that pass Internet traffic back and forth.

One by one, cable and phone companies that had conducted trials using NebuAd's ad-serving system have indefinitely suspended expansion plans. Executives at the Internet services blame the climate in Congress.

"A bunch of them have dropped [NebuAd] like hot potatoes," said Gigi Sohn, president of the advocacy group Public Knowledge.

Annmarie Sartor, spokeswoman for CenturyTel Inc., said it was ready to proceed until "Congress started questioning privacy." Cable One Inc. and Knology Inc. also have ended trials without immediate plans to move forward, as have others.

Although NebuAd claimed last year that ISPs representing millions of customers run NebuAd's system, it's unclear how many, if any, partners remain.

NebuAd's chief executive, Bob Dykes, declined to comment. Spokeswoman Janet McGraw said via e-mail, "We do not have any specific business updates at this point."

A similar company, Phorm Inc., has also faced complaints since its February announcement of partnerships with three access providers reaching 70 percent of Britain's broadband market. A representative said Phorm CEO Kent Ertugrul, who has praised his company's commitment to privacy, was unavailable for an interview.

Both systems work with Internet service providers to scan Web traffic for patterns. Then NebuAd or Phorm determines which ads are likely to interest customers.

NebuAd and Phorm say their systems do not register visits to sites related to "sensitive" subjects like health or sex, nor do they read e-mails or track consumers by name. Yet questions arose about how well the ISPs are informing subscribers and getting consent.

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