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Controversial Behavioral Tracking Company NebuAd Is Shutting Down

May 20, 2009 08:00 PM
by findingDulcinea Staff
NebuAd, a start-up that used deep-packet inspection to track online activity, is shutting down after public outrage and Congressional pressure drove away its ISP clients.

NebuAd Closing, Reforming in U.K. as Insight Ready

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Online behavioral tracking company NebuAd, which planned to pay Internet service providers for the right to track users’ Web site visits and searches, will soon “cease to exist as an ongoing concern,” according to a letter filed Sunday by lawyers for the plaintiffs and defendants in a class-action lawsuit against the company.

NebuAd has been denounced by privacy advocates and scrutinized by a House subcommittee since last May, when it was revealed that NebuAd had conducted trials with Charter Communications and other ISPs. The company lost most of its clients over the summer and has done little since its founder and CEO left in September.

In November, a class-action lawsuit was filed against NebuAd and the ISPs in California. In the letter to U.S. District Court Judge Edward Chen Sunday, NebuAd lawyer Thomas Gilbertsen wrote that most of NebuAd’s employees were laid off last summer and its main office was closed in September.

“From a company that once employed over 60 people, NebuAd now operates with a skeleton staff, and shortly, that too will disappear,” wrote Alan Himmelfarb, counsel for the plaintiffs.

However, the brains behind NebuAd are reportedly launching a similar company in the United Kingdom called Insight Ready Limited. The company was incorporated by Paul Goad, NebuAd’s former U.K. boss, “with the blessing of what remained of NebuAd US, but the two firms have no business or technical relationship beyond having some of the same personnel,” reports The Register.

The new company does not plan to use ISP data, instead relying on data from individual Web site owners.

Background: Rise and fall of NebuAd

NebuAd made headlines last May when Charter Communications, the fourth-largest ISP in the United States, revealed that it would allow NebuAd to track its users’ activity using its deep-packet inspection service.

Privacy advocates objected to the plan, arguing that NebuAd must have express consent from users—specifically, an opt-in agreement—to track their activity. Organizations such as the Public Knowledge and Free Press and the Center for Democracy and Technology released reports detailing how NebuAd infringed on user privacy.

NebuAd had also conducted trials with at least six other smaller ISPs. Responding to privacy concerns, the House Subcommittee on Telecommunications and the Internet began looking into NebuAd. Hoping to avoid bad publicity and Congressional scrutiny, Charter abandoned its plans with NebuAd in June, and other ISPs followed over the summer.

By September, NebuAd had few, if any, serious clients left, reported The Associated Press. On Sept. 2, founder and CEO Robert Dykes left the company. Soon after, The Washington Post reported that the company was putting its Web tracking plans on hold.

On Nov. 10, with NebuAd’s business virtually nonexistent, 15 Web users filed a class action lawsuit against NebuAd and six ISPs that had tried the technology: Bresnan Communications LLC, Cable One Inc., CenturyTel Inc., Embarq Corp., WideOpenWest and Knology Inc.

The lawsuit is the first to target behavioral advertising and may affect future litigation and legislation over behavioral advertising and deep-packet inspection, writes Law.com.

Related Topic: Phorm

Phorm, a British company that tracks online behavior with deep-packet inspection, has experienced a similar backlash as NebuAd after it was revealed in April 2008 that ISP British Telecom was using the service without informing its customers.

In April 2009, the European commission began legal proceedings against the U.K. government, charging that it allowed Phorm to violate EU data protection laws, reported The Guardian.

Reference: Court letter; reports on NebuAd

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