What are Internet cookies and why are they considered controversial from the perspective of personal privacy?

Cookies are inherently harmless. Cookies are simple uncompiled text files that help coordinate the remote website servers and your browser to display the full range of features offered by most contemporary websites.

These features include hassle-free automatic logins and authentication, shopping cart functionalities, third party ad serving, ad management, preference setting, language setting, among many others. As cookie technology evolves along with website publishing and advertisement technology, privacy issues are sure to arise time and again.

Storing personal information and tracking user behavior

While cookies by themselves cannot dig or research your information or search your computer, they do store personal information in at least two ways—form information and ad tracking. This personal information is not generated by the cookies themselves but by your own input into websites' order forms, registration pages, payment pages, and other online forms. Often used for e-commerce, this information is often encoded and protected from hacking by the remote server through limited interaction via security features like secure sockets layers (SSL) certified pages and similar network security schemes.

Cookie-based ad tracking has evolved through the years. From simple operations like counting ad impressions, limiting popups, and preserving ad sequence, third party ad serving cookies have evolved to user profiling/website preference tracking.

This latter group of activities—ad tracking, that has attracted a lot of controversy among online consumer privacy groups and other concerned parties. Many of the largest websites online use large-scale third-party ad serving networks which cover many sites. One of the largest is Google's Adsense/Adwords ad serving network. Literally, millions of pages run Adsense ads. For every click a valid user makes on a Google-served ad on their site, site owners make money ranging from pennies to dollars.

Maximizing advertising effectiveness through cookie-based user profiling

Google's ad-serving platform embodies many of the technological innovation used by other ad serving companies—it uses a user profiling system that tracks and models a particular user's browsing and ad clicking habits. Google has long provided contextual advertising—ads are triggered by the words on a page. Google's ad serving system has added another layer to this technology—user preference modeling/tracking.

Simply put, when a user visits particular websites or reads particular content, Google's ads will try to serve ads to that user that matches their content browsing preferences. The preferences are not consciously or explicitly set by the user but modeled after the user's browsing history, page viewing, and ad clicking history. Accordingly, when a user reads “dog training” pages and moves on to another Google ad-powered page that might not be related to dog training, dog training ads might follow the user to the new page. There is no obvious notice or notification sent to the user that the user's actions online are being tracked for ad-serving purposes.

As observed by some online consumer privacy groups, this ubiquitous tracking and ad-specificity increase the effectiveness of ads. However, they urge that such increased ad effectiveness must be weighed against the impact on user privacy and the fact that there is no obvious consent given for such tracking. Given the rapid evolution of cookie-based ad-serving and behavior-tracking technology, consumer privacy activists are urging a reconsideration of the default standards for cookies. The rise and fall of flash cookies intensified the privacy debate.

Opt-in cookies versus opt-out cookies

For much of the history of the Internet and cookie-enabled websites, most websites planted cookies and dealt with user information on a purely opt-out basis. By default, websites are free to load their cookies onto your computer. If you don't like it, you can always search for the cookie files and delete them or set your browser to prompt you when a cookie is being planted. Moreover, there are websites like networkadvertising.org that lists most of the large third-party ad serving services on the Internet and allows users to select the networks they'd like to opt-out from.

Proponents of the opt-out model tout the smooth navigation experience users have. You merely go from one website to another. There is no “gate” you have to pass through to read free content or use free tools. This makes the Internet easy to navigate and convenient to use.

Critics of the opt-out model point to the increasingly intrusive abilities of third-party ad tracking cookies which follow users from one network site to another. These cookies create dynamic profiles of the user which advertisers use to maximize their revenues at the expense of users who were neither notified nor gave their consent. The users are “surfing blind” because they do not know which information is being collected, the purposes of such collection, nor are they given a copy of the collected information.

Moreover, online behavior tracking might lead to group-based discrimination (e.g., people using a particular block of IP addresses, or people that came from particular websites). They also raise the danger of private groups collecting information which is later turned over to government authorities. Since constitutional protections only cover government actions, private data collecting poses particularly serious concerns.

Online consumer privacy groups urge a new default standard for cookies—OPT OUT. Under an opt out scheme, consumers are notified via an alert or window when they load a website. The user must consent to the notice before they can navigate the site and any cookies are planted. At a minimum, the notice is to contain the following: disclosure of information gathering practices, the uses for this information, and policies for processing and disposing of this data.

The user should be given the right to know if the information being gathered contains any personally identifying data, the right to get a copy of the data collected at an affordable price and in a form that the consumer can readily understand, and the right to request a correction of the data, and, most importantly, the right to have all data on the user's behavior/browsing pattern within the website destroyed.

Consumer privacy protection activists argue that given the huge evolution of websites like Facebook which pose extensive security concerns as well as the evolution of “hidden” cookie technology as exemplified by flash cookies, an opt out regime is the only effective way to safeguard user information.

Not so fast, says third-party ad servers, exemplified by no other than Google's ad department. Google argues that an OPT IN regime is unworkable because of the following:

Consumers, when they first arrive at a new website, don't know enough about the website to opt in. They don't know the features of the site and don't know the benefits to weigh against the costs to their privacy. It is, they argue, unrealistic to expect that the user can come up with an informed decision to opt in. It's arguably much better to plant the user tracking cookie when the user arrives at the site, so they can get a fuller understanding of the site's offerings and let them opt out at a later time if they wish. Now, at this point in time, it is argued, they would have enough information as to which features to opt out from.

An opt-in system forces marketers and websites to ask for more information than they would normally ask for since they have to compensate for the higher cost of each registered member. Since more users are turned away by the opt-in system, the cost per user increases and this forces website owners and/or third party ad servers to ask for more information which they can monetize later or ask the user to opt in to more areas/features of the site.

Compare this to an opt out system which incentivizes websites to offer consumers a feature by feature list they can opt out from. Sites and services are pushed to do this in a bid to retain the user. This incentive, arguably, isn't present in an opt in system.

If opt-in becomes the standard, the protections such a system is supposed to provide actually disappear because people will become desensitized to opt-in terms and conditions. Users will, as a habit, automatically click “I agree” without reading the details. So we end up with the same problem the opt-in system was supposed to fix--unprotected and exploited consumers. This is what happened to adware when Internet Explorer was updated to prompt users when installing applications.

Finally, opt-in imposes costs on website owners and marketers, since they filter out users that would normally navigate in and out of their site unobtrusively under an opt-out system. There might be a decrease in registrations as a percentage of users don't have enough information about the site to “risk” cookie planting/behavior tracking. Add to this cost of lower registration the fact that there's no “universal”registration form among websites.

The end result of these costs would be to incentivize websites and their affiliated ad-serving partners to create “walled gardens”--registration guarded sites that have a higher cost of exchanging information among each other. Walled gardens can severely limit user's abilities to smoothly and easily navigate from one website to another. This leads to a severe limitation of users' opportunities to experience new pages/websites outside of the “walled garden.” A key example of this is Facebook.

The future of cookies

There are two kinds of cookies—cookies to help a site function and cookies for ad tracking/monetization. The divide between the two grows wider as the debate between the proper role of cookies and the user tracking/user information storage they make possible gets louder.

One thing is certain, cookies website-enhancing functions will remain in demand regardless of whether the cookie, as a file form, survives today's raging privacy debates. Cookies are at a tenuous yet crucial crossroad between public policy and technology. We have no doubt that in the future this impasse will be safely resolved—high levels of personal privacy while preserving full website functionality and advertiser monetization. It is just a matter of innovation.