PARIS Targeted online advertising is set to face increased scrutiny from European Union regulators concerned about invasion of privacy, threatening the growth of a potentially big online revenue-booster for media companies.
"This is a very hot topic that can be expected to be part of our work program next year," Gabriele Loewnau, a senior legal adviser for the German Federal Commissioner for Data Protection, said on Friday.
The German commissioner currently heads the European Union's advisory body on data protection matters, the so-called Article 29 Working Party.
Recommendations from the working party have been used by the European Commission to get Google to curtail the amount of time it stored past Web searches to 18 months.
When an individual makes an online search or purchase, the computer can remember the entry through so-called cookies and pass on the information to advertisers.
"Targeted advertising will become a major tool for us, it will irrigate various parts of the group and help increase our average revenue per user," Jean-Bernard Levy, chief executive of telecoms and media group Vivendi, told a telecoms conference in Montpellier last week.
Brussels' heightened awareness comes as more than 13,000 Facebook users have signed a petition protesting against the networking site's new advertising system which alerts members of friends' purchases online.
Members can opt for their transactions to be kept private but critics say the option is easily missed.
Some Facebook members have even threatened to leave, complaining the new system allowed their friends to find out what they were planning to give them for Christmas. The Facebook petition was led by the U.S. civic action group MoveOn.org.
"Sites like Facebook are revolutionizing how we communicate with each other in a 21st century democracy," said Adam Green, a spokesman for MoveOn.org Civic Action.
"But we need to make sure they place the needs and privacy rights of their users ahead of the needs of corporate advertisers," he said in an e-mailed statement.
Facebook says it spares no effort in respecting members' privacy and stresses they can always prevent their purchases from being passed on to friends.
Online advertising is the fastest-growing segment of the ad industry, gaining more than 25 percent a year, or more than five times the recent average annual growth all media included.
Between 6-7 percent of advertising is spent on the Internet globally, analysts estimate.
Internet giants including Google, its YouTube division, Yahoo, and MySpace have all said they were keen to develop targeted advertising to boost revenues. But a balance would have to be struck with privacy, analysts say.
"Online sites have to make sure they are not intruding people's privacy, otherwise targeted advertising will backfire," said Vincent Bonneau from French telecoms research group Idate.
YouTube introduced in August a new type of targeted advertising - banners that pop-up at the bottom of videos. The ads target consumers according to the content viewed.
"It will be a significant booster to the business. We will be able to charge more for that," Patrick Walker, director of video partnerships at YouTube for Europe told Reuters last week.
But if targeted advertising is regarded as the next big thing, media specialists say there are few statistics available on its effectiveness and it is still traffic that counts.
(Additional reporting by Cyril Altmeyer in Paris; editing by Sue Thomas)