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Technology: Tracking Technology Inroads Create Consumer Backlash

What's New in Technology

October, 2010

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Technology: Tracking Technology Inroads Create Consumer Backlash

Online tracking devices – commonly referred to as cookies – and the industries involved in their proliferation are attracting increased attention from lawmakers in response to an upswing in consumer complaints and litigation. As a result of recent public scrutiny and ensuing litigation, the Federal Trade Commission is expected to review its current privacy guidelines and possibly introduce a do not track registry (like the do not call list that governs telemarketers). Whatever the eventual outcome and response from legislators and regulators, the current backlash will have significant impact on the ever-burgeoning online advertising industry. Here are some of the issues at stake.

Cookies Are Legal

Online tracking technology has been around for a decade or so. Court rulings made in the early 2000s allowed websites to place small text files, or cookies, on the computers of users who visited their sites. These cookies allowed sites to remember previous visitors. This had benefits for the users, allowing them to bypass login processes. Most cookies are able to track users across various websites, collecting information on browsing histories, interests and shopping habits. Not surprisingly, cookies have played a major role in building the online advertising industry into the $23 billion giant it has become.

Why the Backlash?

Over the past few months, consumers have filed several lawsuits in California against certain websites and the companies that create tracking technology. Cookies have been with us for awhile and earlier court decisions gave them a green light to track across websites, so why are we now seeing this type of backlash? Complainants argue that the tracking industry has developed increasingly sophisticated technology that is nothing like its earlier antecedents. They believe that the advertising technology industry encroaches on the privacy of individuals who visit these websites. Privacy issues occur across the board. Recently, reports on the increasing use of tracking tools by children’s websites created its own flurry of public outrage. The California lawsuits accuse the companies named –including major media enterprises and news networks – of essentially violating the existing Federal Computer Fraud and Abuse Act.

Recent Furor over Flash Cookies

Experts in the information privacy sector believe that competitive elements within the tracking technology industry have created solutions to block consumers’ attempts to safeguard their own privacy. Researchers have identified flash cookies – a new type of tool that overrides users’ efforts to delete cookies – as a particularly worrisome example of this trend.

Smart Phones

Smart phone users are subject to the same tracking technology they encounter on their laptop or desktop. Mobile tracking is getting renewed public scrutiny as online advertisers try harder to reach smart phone users – potentially a highly lucrative audience group. Watchdog groups have voiced similar concerns over tracking devices that override smart phone users’ attempts to get rid of them.

A contentious issue with serious implications for the media/communications industry and their advertisers as well as consumers, the cookie backlash is one to follow.

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These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact their CPA regarding the topics in these articles.

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