Behavioral ad targeting firm NebuAd has reportedly all but ceased operations, according to court papers filed in federal court in a privacy-invasion lawsuit against the start-up.
The Web start-up intended to pay ISPs to let it install monitors inside their networks in order to watch users’ Web habits, create profiles for them, and then serve up ads relevant to their specific interest no matter what Web site they were on.
The practice, called deep-packet inspection or “sniffing,” has come under fire as an invasion of users’ privacy by both the companies performing it and by the ISPs permitting it to be done on their subscribers.
A class action lawsuit filed last year in U.S. District Court in San Francisco charged that the company and six ISPs it worked with broke anti-wiretapping statutes by diverting and reading users’ online communications without consent.
At the time, Redwood City CA-based NebuAd said it was reviewing the complaint and would defend against it vigorously. The company maintained that the data it monitored was not sensitive and was not permanently stored.
But a letter filed in the case by NebuAd and the prosecuting attorney and made public on Monday said that in fact, the company “has been winding down its affairs since late summer 2008” and “will cease to exist as an ongoing concern” once it pays off creditors with existing assets.
“NebuAd now operates with a skeleton staff, and shortly, that too will disappear,” said the letter, which was first reported by Mediapost.
NebuAd got roasted in Congressional hearings on behavioral ad targeting last July for a market test performed with Embarq, a broadband provider, in which simply changing the ISP’s online privacy policy elicited only 15 opt-outs from some 26,000 test subscribers.
Charter Communications, one of the large ISPs that had said it would use NebuAd to offer more relevant ads to users, pulled out of its partnership with the company in June 2008.
In September the company announced that it was pursuing revenue models other than deep-packet inspection and ad-serving. Later than month, company co-founder and CEO Bob Dykes resigned.
Behavioral targeting, which delivers ads to Web users based not on the content of the page they’re on but on the pages in which they’ve shown past interest, has had a controversial history. Marketers say the public will benefit from seeing ads they find more relevant, and that advertisers will benefit in terms of more clickthroughs and lower online ad costs.
But privacy watchdog groups have objected to the tech platforms used to keep track of where people go on the Internet, alleging that combining even anonymized records with offline databases can identify individuals.
In March the Internet Advertising Bureau produced preliminary guidelines for using behavioral targeting. While these proposed guidelines advised that consumers must be notified that they’re being tracked online, the IAB also said marketers can assume consent to that tracking unless a consumer opts out, and that they should actively seek that consent “where applicable.”
In the U.K., ISP BT has said it will roll out behaviorally targeted ads to its subscribers using a platform similar to that developed by NebuAd. The maker of that platform, U.S.-based company Phorm, has signed off on the IAB guidelines, along with Google, AOL, Microsoft and Yahoo.
BT executives have told the press the Phorm service will probably be offered to subscribers on an opt-in basis.
