In Online Privacy Plan, the Opt-Out Question Looms

The Federal Trade Commission’s proposed privacy mechanism could cause a major shift in the online advertising industry, as companies that have relied on consumers’ browsing history try to make up for what could be billions in lost revenue. If the vast majority of online users chose not to have their Internet activity tracked, the proposed “do not track” system could have a severe effect on the industry, some experts say.

It would cause major harm to the companies like online advertising networks, small and midsize publishers and technology companies like Yahoo that earn a large percentage of their revenue from advertising that is tailored to users based on the sites they have visited. Under a situation where many users opt out of being tracked, other companies, like Google, may take a much smaller hit because the vast majority of its revenue comes through search ads that would not be affected by a do-not-track mechanism. Microsoft, which also sells display advertising through its ad network, could also survive a hit to user data collection since it earns revenue from sources other than advertising, including software and gaming, experts say. The FTC is seeking comment over the next two months on whether a do-not-track mechanism should allow consumers to control the types of advertisements they would like to see in addition to having the ability to completely opt out of having their data collected. During this period, the commission will seek comments on the possible unintended consequences of the proposal, including the likely effect if a large number of consumers opt out.