The problem with Microsoft's "Do Not Track" Policy

With the upcoming release of Internet Explorer 10, Microsoft will respond to user demand for privacy by instituting a default Do Not Track option that prevents 3rd party companies from collecting user information through downloaded cookies. While this move may be popular with users, it has significant ramifications for the internet advertising industry. Much of the industry depends on these cookies to deliver targeted ads to users. Ad exchanges like Facebook's new FBX ad exchange represent a $2B industry that would essentially not exist if it were not for tracking software. Internet Explorer, with a roughly 1/3 market share for web browsers, is threatening the viability of the ad exchange business model, especially if other browsers follow suit and institute their own DNT default option. While major publishers like the New York Times and Yahoo will continue to sell advertising space to large advertisers, small advertisers that cannot afford to buy banner ads from major publishers and rely on ad exchanges to reach targeted users will be hurt the most by this policy.

Another drawback to Microsoft's DNT default is the impact it can have on mobile. If the policy is applied to Windows 8 phones, it will place a hurdle for advertisers hoping to reach users through mobile applications. This in turn will threaten a major revenue source for Windows app developers, leading them to prefer Apple and Google phones which allow them to sell targeted mobile ads. This is a big gamble for Microsoft, which could risk turning off developers and reducing the number and quality of apps available on its phones.

Sources:

http://www.businessinsider.com/microsofts-dnt-threatens-facebook-2012-9
http://www.businessinsider.com/microsoft-do-not-track-and-windows-phone-2012-9