Online Ad Snoop NebuAd Gives Up the Ghost. Who’s Next?

Talk to online ad folks for any amount of time and you’ll walk away thinking that behavioral targeting–whereby marketers track and chase Web surfers based on which sites they visit and what they do there–is both old hat and the wave of the future. But I’m still convinced that there’s a very big gap between the way the ad industry views this stuff and the way politicians and average Americans do.

And I think that gap is going to trip up a lot of big players in the years to come.

For a reminder, head on over to NebuAd’s Web site, which no longer works. That’s because the targeting firm, which once employed 60 people, closed up shop on Friday, according to MediaPost.

NebuAd was supposed to work with various Internet service providers and track Web surfing behavior of the ISPs’ customers, then sell that data back to the ISPs. That plan blew up last summer when the company became the subject of congressional hearings, and by last fall just about all of its former clients had run screaming from the company.

The standard response here from ad folks is that NebuAd was a bad apple that practiced a particularly noxious version of targeting. And that the press, lawmakers and the general public don’t really understand how targeting works.

And all of that may be true! But even if it is just a perception problem and the online ad business has only the best intentions when it comes to collecting and using personal Web data, it’s a perception problem that the industry has done a lousy job of fighting.

So said my lunch date today, who’s a veteran of several big online publishing companies, and who tells me that the Interactive Advertising Bureau, the industry’s trade group, is petrified of more NebuAds because they will likely lead to regulation.

Recall that Rick Boucher, a conservative Democratic congressman from Virginia, has already promised to regulate behavioral targeting at the likes of Google (GOOG), Yahoo (YHOO) and Time Warner’s (TWX) AOL. If the thought of that sort of thing is so distasteful to the ad guys, they’re going to have to start selling much more persuasively than they’re doing right now.

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