Behavioral targeting is the practice of sending advertisements to internet users based on information gathered regarding their online habits. Many online advertisers utilize this approach by placing a cookie on a computer when it connects to certain designated sites. The cookie then identifies that browser and assigns it a random number and is then able to track other sites visited, what search queries are entered, shopping habits and more. No other personal information such as a the users name is generated or stored by the targeting agency.
The collected data is then used to determine products of possible interest to that browser and tailored ads are delivered to them. For example if person searches or reads about golfing, advertisements for golf equipment or golf resorts would be sent to him. Companies such as Revenue Science have been using this method of targeting consumers for awhile now and have found it to be far more successful in terms of generating sales than sending undifferentiated ads (creating as much as 10x more revenue). However, there is a controversy growing over the legality of the behavioral targeting tactics.
The Federal Trade Commission is reviewing the legality of behavioral targeting in response to many complaints it has received from various advocacy and public interest groups concerning the methods of the online advertisers. The FTC currently has established some voluntary guidelines that make it harder to target consumers in this way, and is considering whether to make them mandatory.
A recent poll by Harris Interactive found that 6 out of 10 people were uncomfortable with the idea of companies tracking personal information such as their search queries and using that information to target specific ads to them.