The issues of behavioral targeting go beyond the usual concerns about privacy and consumer tracking. At the core of the approach to presenting advertising to people based on their online habits comes the practice of behavioral targeting.

The Federal Trade Commission held a two-day town hall meeting on the practice in November 2007. As a result of that meeting, the FTC proposed principles on behavioral targeting; whether or not advertising networks follow them has been left up to those businesses.

Before anyone rushes too fast to push the behavioral targeting envelope, a situation between Valueclick and Tacoda needs to be resolved. ValuecClick filed suit in Los Angeles against Tacoda in July 2008 over accusations of infringement on two patents.

MediaPost said the patents were both invented by Gather.com founder Thomas Gerace. ValueClick acquired Gerace’s former company, BeFree, in 2002.

AOL acquired Tacoda in 2007, and MediaPost said ValueClick warned AOL in March 2007 about their belief Tacoda infringed ValueClick’s patents.

Another patent lawsuit involves a familiar name. InformationWeek said Google picked up its fourth infringement lawsuit this year, as Web Tracking Solutions and Daniel Wexler accused the search advertising giant of infringing an accounting reporting patent with Google’s AdSense service.

The agency also charged that ValueClick and its subsidiaries, Hi-Speed Media and E-Babylon did not secure consumer’s sensitive financial information, even though they claimed to do so.

ValueClick Logo
(Photo Credit: ValueClick)

The FTC said Hi-Speed Media used misleading emails, banner ads, and pop-ups to attract consumers to its Web sites. The emails and online ads claimed that consumers were eligible for "free" gifts, including laptops, iPods, and gift cards.

The FTC alleged that consumers lured to ValueClick’s Web sites by these promises had to go through a number of expensive third-party offers – including car loans and satellite television subscriptions which they were required to participate in at their own expense, so they could receive the "free" merchandise.

The FTC maintained that ValueClick’s use of deceptively labeled email offering free gifts and its failure to disclose that people must spend substantial amounts of money to receive the promised "free" merchandise violates the CAN-SPAM Act and the FTC Act.

The FTC also charged that ValueClick, Hi-Speed Media, and E-Babylon, misrepresented that they secured customer’s sensitive financial information. The FTC alleged the companies published online privacy policies claiming they encrypted customer information, but either failed to encrypt the information at all or used a non-standard and insecure form of encryption.

The settlement requires ValueClick to clearly disclose the costs and obligations of its products it claims are "free" to consumers and bars future violations of the CAN-SPAM Act.

As of April 1, 2008 the program will be dropped from the largest affiliate network – Commission Junction. They handle the reporting and pay affiliates in behalf of customers like Yahoo!, Home Depot, and Buy.com. Commission Junction is owned by ValueClick (which recently had some bad news of its own).

eBay started their affiliate program in 2001 and it has more than 100,000 affiliates globally. For those unfamiliar, an affiliate marketer is a person or business who promotes eBay’s products on their web site, blog, or forum and makes money each time they refer a sale. Existing affiliates must move to the eBay Partner Network by May 1st. Not much time to change all those links.

I asked a newer affiliate, Ariel Adams for his perspective. Adams blogs about luxury watches and makes money referring people to auctions that sell watches on eBay. He talked about problems with reporting and how he can’t tell which watch sells. Mostly though it’s a huge problem to change all the links (and too bad there’s not a tool to help this process, because so far eBay hasn’t offered a lot of details on how the quick change is going to happen).

“This creates a huge inconvenience for people like me because we rely on lots of existing links, which now all need to be changed. For me we are talking 100s of links, and so far I don’t see anything that can make the switch particularly easy.”

For long-time affiliates this is an even more daunting task.

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The in-house program will allow eBay to more closely align the program with its publisher’s needs and the eBay Community.

eBay Logo
(Photo Credit: eBay)

"The new eBay Partner Network will allow us to have a direct relationship with our affiliates, innovate faster and deliver new products and tools in a more timely and efficient manner, providing new revenue opportunities for our affiliates and creating a more streamlined user experience for our buyers and sellers," said Matt Ackley, vice president of Internet marketing at eBay.

As part of the move to an in-house affiliate network, eBay and Half.com will no longer run their affiliate programs through ValueClick’s Commission Junction platform. eBay’s Tradera AB, ProStores, Inc, Reseller Marketplace, Media Marketplace, eBay Stores and StubHub will continue to offer affiliate programs through Commission

eBay and Half.com affiliates will have to move their affiliate links over to the eBay Partner Network by May 1st. eBay will continue its partnership with ValueClick’s technology division Mediaplex, for ad serving, tracking and other custom projects.

ValueClick announced the settlement today, which comes after an FTC investigation into whether or not ValueClick violated the CAN-SPAM Act and the FTC Act.

“The settlement is based solely on the past practices of the Company

It’s unlikely that anyone will want to acquire the company until it’s had the chance to respond to a Federal Trade Commission investigation.

According to ClickZ, ValueClick filed a Form 8-K (which is basically SEC talk for “we have something material to tell the world”) revealing the FTC is investigating the company for possible violations of the CAN-SPAM act.

“We continue to believe that we are compliant with all current state and federal regulations pertaining to our lead generation activities, and we intend to fully cooperate with the FTC in connection with their inquiry,” John Ardis, vice president, corporate strategy for ValueClick, told ClickZ in an e-mail.

While experts believe ValueClick is in fact following the CAN-SPAM law, until the investigation is complete, I doubt any suitor would want to take their hand in marriage.

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Interest has swirled around ValueClick, as companies like DoubleClick, Right Media, 24/7 Real Media, and aQuantive have been snapped up by bigger firms. Andy Beal sees that interest cooling for the moment:

While experts believe ValueClick is in fact following the CAN-SPAM law, until the investigation is complete, I doubt any suitor would want to take their hand in marriage.

Interest from the FTC has centered on “certain ValueClick websites which promise consumers a free gift of substantial value, and the manner in which the Company drives traffic to such websites, in particular through email.”

Until that little bombshell slipped into ValueClick’s inbox, the company said it had no knowledge the FTC was investigating it for any reason.

Despite the attention from the FTC, shares of ValueClick continued to enjoy a boost today. Shares were up $3.20 to $33.20 at press time.

Dominic Preuss, product manager for Google Local advertising, couldn’t be happier about the formal arrival of the local business ads product for AdWords. Testing began in December 2005, where occasional notices of the ad balloons on Google Local maps drew commentary in the blogosphere.

Another early test, of a Barnes and Noble advertisement that appeared with searches for “booksellers nyc” on a map of Manhattan, also found considerable attention online as a few users spotted the “ad balloons” Google (NASD:GOOG) used for testing.

Preuss said in a phone call that advertisers participating in the initiative have been “very positive” in their assessment of the latest service. Click-through rates have been very good too, Preuss noted.

There are a lot of “levers” for advertisers to pull in AdWords for the local business ads, to control the locations and keywords for campaigns. It sounded like advertisers were just beginning to scratch the surface of what Google has made available.

From a user perspective, Google’s usual contextual ads appear with the Local search results. The “booksellers nyc” example returns one ad atop the results and three below that list. Then the newest features for local businesses can be seen in those Local search results. Google described this in further detail:

A search on Google Local for “designer boots austin tx” demonstrates the new feature. Each local listing shows the business name, address, and phone number; below each listing, a link to the business’ website and a text excerpt related to the search terms appears.

Google did manage to finish slightly up for the week in the stock market, closing at $390.00 on Friday; after-hours trading has pushed shares down 40 cents at press time. Other Internet advertising plays had relatively flatter performances.

MIVA (NASD:MIVA) suffered a drop after it reported a greater than expected loss for the fourth quarter and readjusted forecasts for the first quarter as the company anticipates a loss then as well.

The company has been trying to pull out of the doldrums with a series of recent deals. One pairs MIVA with Intellext, a provider of search tools and services. Intellext will deliver MIVA pay-per-click and pay-per-call advertising to users of Intellext’s Watson desktop search tool.

ValueClick Inc (NASD:VCLK) finished the week up at $16.92, but well off its 52-week high of $20.98. The company recently completed the integration of its ValueClick Media and Fastclick display advertising networks and named the division ValueClick Media.

The company said it can reach over two-thirds of the US Internet-using public per statistics from comScore Media Metrix. Analyst William Morrison of JMP Securities upgraded ValueClick to a rating of “strong buy” and raised his target price for VCLK to $25 in an advisory note to clients earlier this month.

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David Utter is a staff writer for WebProNews covering technology and business.

A stock swap worth about $214 million will bring online advertiser Fastclick into ValueClick’s fold as a wholly owned subsidiary, under the ValueClick Media umbrella. A joint statement issued by the companies says the deal will be completed in the fourth quarter.

Fastclick reaches 112 million users on about 9,000 web sites, according to a comScore report cited in the statement. Four divisions currently comprise ValueClick: Commission Junction (affiliate and search marketing); Mediaplex (advertising and email technology); PriceRunner (comparison shopping and consumer reviews); and ValueClick Media (brand, direct, and PPC marketing).

ValueClick will work quickly to integrate Fastclick’s advertisers and publishers, as search activity by users will increase rapidly with the approaching holiday shopping season. The firm will not want to disrupt business for what will be many advertisers’ busiest time of the year.

“The addition of Fastclick should give our ValueClick Media division the industry’s largest reach into Internet users, enhancing our Company’s overall leadership position with advertisers and publishers,” said James Zarley, chairman and chief executive officer of ValueClick, in the statement.

David Utter is a staff writer for WebProNews covering technology and business. Email him here.

Pricerunner will increase ValueClick’s ability to participate in the expected growth in Europe’s online retail sales, which Forrester Research forecasts will grow from 40 billion Euros in 2004 to 167 billion Euros in 2009 – an annual growth rate of 33 percent.

Under the terms of the agreement, ValueClick will acquire all outstanding equity interests in Pricerunner for an adjusted purchase price of approximately $29.0 million, including cash and approximately 263,000 shares of ValueClick common stock to be issued to three management shareholders of Pricerunner.

“We have been looking to add comparison shopping services as part of our strategic growth plan, and in Pricerunner we have found an established partner that will help us take our first step in this rapidly-growing and profitable area of performance-based online marketing,” said James Zarley, chairman and chief executive officer of ValueClick. “Comparison shopping is a strategic fit with our media, affiliate marketing and search offerings, and we look forward to working with Pricerunner and helping them expand their presence in Europe.”

Jeremy Muncy is a staff writer for WebProNews.com