Privacy vs. Profit: The Battle Over DPI-driven Advertising

This cautious approach may be due in part to service providers’ reluctance to jump into the hailstorm that DPI-related efforts have created to date. For example, Comcast Corp. (CMCSA) recently got a lot of heat in the blogosphere when it was accused of throttling peer-to-peer streaming video traffic. (It initially claimed it was only performing ongoing “network management.”) Shortly after a formal hearing on the then-alleged activity, Time Warner Cable Inc. (TWC). “The ISP is not a party to the Web relationships any more than they are to a phone call made on their facilities. That’s why I believe that they have absolutely no right to look at the packet stream in any detail at all, much less deeply enough to gather behavioral trend data.”

Nolle’s even uncomfortable with the notion of an opt-in because he says he’s not clear that users would really understand and thus offer informed consent.

“Would you opt in to having your voice carrier tap your phone for any reason?” he asked.

The Stakes in Online Advertising

Ad spending forecasts project what everyone knows, that more ad spending is shifting to the Web as companies look for new and innovative ways to reach potential customers.

Microsoft Corp.’s (MSFT) concerted megabucks effort to acquire Yahoo Inc. (YHOO), and its purchase in late June of targeted advertising company Navic Networks further underscore the importance of the Web advertising business. The company also announced plans in May 2007 to pay $6 billion for online marketing firm Aquantive.

Forrester Research Inc. (FORR) forecasts that online ad spending will climb from an estimated $18.4 billion last year to a projected $61.3 billion in 2012. Interactive spending is expected to make up 18 percent of marketing budgets in 2012.

These gains, Forrester believes, will come at the expense, literally and figuratively, of display ads, whose piece of the pie will shrink from 33 percent to 22 percent. E-mail marketing’s share will also shrink from 15 percent to 7 percent by 2012, according to Forrester.

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