The trading of Web users like a commodity

Access to you online is being bought and sold in less than the blink of an eye.

On the Web, powerful algorithms are sizing consumers up, based on myriad data points: what they Google, the sites they visit, the ads they click. Then, in real time, the chance to show a consumer an ad is auctioned to the highest bidder.

And all of this happens automatically, and imperceptibly, to most consumers. An electronic trading system sells ad space on the Web pages people visit at the very moment they are visiting them. Millions of bids flood in every second. And those bids could determine whether the consumer sees an ad for, say, a new Lexus or a popcorn maker.

A big player in this space, the Rubicon Project, based in Los Angeles, has eclipsed Google in the percentage of Internet users in the United States reached by display ads sold through its platform, according to comScore, a digital analytics company.

Rubicon is among a handful of technology companies that have quietly developed automated ad sales systems for Web site operators. The bidders are marketers seeking to identify their best prospects and pitch them before they move to the next Web page. They all depend on data-mining to instantly evaluate the audiences available to see those online display ads.

Frank Addante, the founder and chief executive of Rubicon, says about 97 percent of American Internet users interact with its system every month. Most of them aren't aware of it.

That worries regulators and consumer advocates, who say such electronic trading systems could unfairly stratify consumers, covertly offering better pricing to certain people while relegating others to inferior treatment.

"As you profile more and more people, you'll start to segregate people into 'the people you can get money out of' and 'the people you can't get money out of,'" says Dan Auerbach, a technologist at the Electronic Frontier Foundation, a digital civil rights group.

For many consumer advocates, real-time bidding resembles nothing so much as a cattle auction.

"Online consumers are being bought and sold like chattel," says Jeffrey Chester, the executive director of the Center for Digital Democracy, a consumer group in Washington that has filed a complaint about real-time bidding with the Federal Trade Commission. "It's dehumanizing."

This year in the United States, advertisers are expected to spend about $2 billion on display ads bought through electronic auction-based exchanges, versus about $733 million in 2010, according to a recent report from Forrester Research. By 2017, the report estimated, that market is likely to reach $8.3 billion.

But Rubicon is not just a sales platform for Web site operators. It's an analytics system that uses consumer data to help sites figure out how much their visitors are worth to advertisers.

Rubicon typically adds details from third-party data aggregators, such as users' sex and age, interests, estimated income range and past purchases. The whole process typically takes less than 30 milliseconds.

Consumer advocates say real-time bidding companies are acquiring and commoditizing consumer data with little benefit to consumers themselves - and much digital snooping.

Mr. Addante and other industry executives disagree, saying consumers benefit by receiving ads and offers specifically relevant to them. Their systems do not invade privacy, they say, because they use numerical customer codes - not real names - to collect "anonymous" information about people's online activities.

The ad spaces, or impressions, sell in lots of 1,000. The price depends on variables like the size and type of ad space, the type of user, and whether the user is in an urban or rural location.

One moment Turn, a buy-side platform for marketers, recommends that an insurance customer bid up to $35.70 per lot being sold by Facebook Exchange, a Facebook service that auctions ad space, and $1.35 per lot being offered by AppNexus, another sell-side platform.

Ad agencies and brands can now check the intraday prices for various impressions. Many ad agencies have even created in-house "trading desks."

But threats to consumer privacy may increase as real-time bidding moves more aggressively into mobile sites and apps, entities that may collect valuable information about users' real-time locations and geographic patterns.

"Real-time bidding creates the possibility for companies to tag you wherever you are going," says Rob van Eijk, a computer science researcher at Leiden University in the Netherlands. "It is becoming a huge imbalance for the ordinary user because, in the end, the ordinary user is the product."

The New York Times