Internet activity is tracked more than we realize

A famous New Yorker cartoon from 1993 showed two dogs at a computer, with one saying to the other, "On the Internet, nobody knows you're a dog."

That may no longer be true.

A new analysis of online consumer data shows that large Web companies are learning more than ever before the gritty details of what people search for and do on the Internet, gathering clues about the tastes and preferences of a typical user several hundred times a month.

These companies use that information to predict what content and advertisers people most likely want to see. They can charge steep prices for carefully tailored ads because of their high response rates.

The analysis, conducted for The New York Times by the research firm comScore, provides what advertising executives say is the first broad estimate of the amount of consumer data transmitted to Internet companies every day.

The analysis indicates that Web companies are, in effect, taking the trail of crumbs people leave behind as they move around the Internet and analyzing them to anticipate people's next steps. So anybody who searches for information on such disparate topics as iron supplements, airline tickets, hotels and soft drinks may see ads for those products and services later on.

Consumers have not complained to any great extent about data collection online. But privacy experts say that is because the collection is invisible to them.

"When you start to get into the details, it's scarier than you might suspect," said Marc Rotenberg, executive director of the Electronic Privacy Information Center, a privacy-rights group. "We're recording preferences, hopes, worries and fears."

But executives from the largest Web companies say that privacy fears are misplaced, and that they have policies in place to protect consumers' names and other personal information from advertisers. Moreover, they say, the data is a boon to consumers, because it makes the ads they see more relevant.

Detail producing payoffs

The rich troves of data at the fingertips of the biggest Internet companies also are creating a new kind of digital divide within the industry. Traditional media companies, which collect far less data about visitors to their sites, are increasingly at a disadvantage when they compete for ad dollars.

The major television networks and magazine and newspaper companies "aren't even in the same league," said Linda Abraham, an executive vice president at comScore.

During the Internet's short life, most people have used a yardstick from traditional media to measure success: audience size. Like magazines and newspapers, Web sites most often are ranked based on how many people visit them and how long they are there.

But on the Internet, advertisers increasingly are choosing where to place their ads based on how much sites know about Web surfers. ComScore's analysis is a novel attempt to estimate how many times major Web companies can collect data about their users in a given month.

Web firms once could monitor the actions of consumers only on their own sites. But over the last couple of years, the Internet giants have spread their reach by acting as intermediaries that place ads on thousands of Web sites, and now can follow people's activities on far more sites.

Large Web companies like Microsoft and Yahoo have also acquired a number of companies in the last year that have rich consumer data.

"So many of the deals are really about data," said David Verklin, chief executive of Carat Americas, an ad agency in the Aegis Group that decides where to place ads for clients.

"Everyone feels that if we can get more data, we could put ads in front of people who are interested in them," he said. "That's the whole idea here: Put dog-food ads in front of people who have dogs."

Some advertising executives say media companies eventually will have little choice but to outsource most if not all of their ad sales to companies like Microsoft and Yahoo to benefit from their data.

Billions of "events"

ComScore analyzed 15 major media companies' potential to collect online data in December. The analysis captured how many searches, display ads, videos and page views occurred on those sites and in their ad networks.

These actions represented "data transmission events" — times when consumer data was zapped back to the Web companies' servers. Five large Web operations — Yahoo, Google, Microsoft, AOL and MySpace — record at least 336 billion transmission events in a month, not counting their ad networks.

The methodology was worked out with comScore and based on the advice of senior online advertising executives at two of the largest Internet companies.

Yahoo came out with the most data-collection points in a month on its own sites — about 110 billion collections, or 811 for the average user. In addition, Yahoo has 1,709 other opportunities to collect data about the average person on partner sites like eBay, where Yahoo sells the ads.

MySpace, owned by News Corp., and AOL, a unit of Time Warner, were not far behind.

Google also has scores of data-collection events, but the company says it is unique in that it mostly uses only current information rather than past actions to select ads.

The depth of Yahoo's database helps explain why AOL is talking with Yahoo about a merger and Microsoft is willing to pay more than $41 billion to acquire the company.

The comScore figures do not include the data that consumers offer voluntarily when registering for sites or e-mail services. When consumers do so, they often give sites permission to link some of their interests or searches to their user name.

The figures also do not account for information people enter on social-network pages.

Informing consumers

Executives from Web companies said they have been working to inform consumers on their data practices.

These companies also noted that they have consumer-protection policies. AOL, for example, lets users opt out of some ad targeting, Google lets users edit the search histories linked to their user names, Yahoo is working on a policy to obscure people's computer-identification addresses that are linked to search results, and Microsoft says it does not link any of its visitors' behavior to their user names, even if those people are registered.

But for all these precautions, the Web giants may be treading into areas that would make their users uncomfortable — if those users knew the extent of the data collection.

A study of California adults last year found that 85 percent thought sites should not be allowed to track their behavior around the Web to show them ads, according to the Samuelson Law, Technology & Public Policy Clinic at the University of California, Berkeley, which conducted the study.

"If you said to people, 'Hey, do you realize that information was not just ephemeral, it ended up potentially tied to your name?' " said Deidre Mulligan, director of the Samuelson clinic. "A lot of people would say, 'Wow, I guess I hadn't really realized that.' "