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

Promised that deep packet inspection (DPI) can do more than just help identify disproportionate Internet use, service providers are mulling the idea of applying this technology to boost sorely needed online ad revenues.

“Smart operators are looking to monetize things beyond network facilities,” said Ibrahim Gedeon, CTO with the technology strategy group of Canadian IPTV service provider TELUS Corp.  “Proactive marketing is where the money is in the future.” The common practice of counting clicks on Websites has some value for ad agencies, he added, but creating profiles based on specific customer activity is far more valuable.

That’s why the market is seeing growing availability of DPI packages from such companies as Allot Communications (ALLT) and NebuAd Inc. that leverage data to help deliver ads based on Internet behavior. ISPs can use such tools to advertisers, creating new revenue streams for both service providers and those that place the ads.

Armed with $30 million in funding, NebuAd launched its solution in this vein last November and now claims to work with small to national ISPs, which it declined to identify. The company “anonymously observes consumer activity across the Internet and derives a richer set of consumer interests matched to over 1,000 interest categories.”

NebuAd describes what it provides as “consumer-centric behavioral targeting for the online advertising industry,” that it claims concurrently protects consumer privacy. As a result, the company said, it can help advertisers to deliver precisely targeted ads that drive substantially increased value per impression.

NebuAd has been assailed by privacy advocates for its efforts. However, in a move to address such concerns the company said it requires ISP partners to provide their subscribers with prior, direct notice and an opportunity for them to express informed choice at least 30 days before the service is deployed. The company also has created the NebuAd Privacy Council, which it says is a group of “privacy industry experts working with the company to guide NebuAd in the development of industry-leading consumer information privacy protection safeguards.”

Despite such efforts and the fact that related privacy-versus-profit issues were examined without results in a Senate hearing in mid-July, some important companies like AT&T Inc. (ATT) are taking a wait-and-see posture relative to the opportunities behavior-based online advertising seems to offer.

“We respect and protect the privacy of our subscribers,” said an AT&T spokesperson. “As we've seen with online properties like Amazon.com and iTunes, it's clear consumers want to receive product and service recommendations and information that is relevant to them. Like the industry as a whole, however, AT&T is still evaluating these opportunities.”

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