Across the pond there has been a storm brewing over privacy and advertising. The largest Internet Service Providers in the United Kingdom – BT, Virgin Media and Carphone Warehouse’s TalkTalk, recently teamed up with Phorm , an ad serving company. In this unusual move, ISPs, which have been traditionally “neutral” to end users web surfing habits, now have an opportunity to cash in by “knowing” what their customers do. So by providing the behavioral data of their customers, ISPs will get paid by Phorm, who will be able to serve customized ads that actually may appeal to those end users. Or so the conventional wisdom goes…

Of course, privacy advocates are not happy. Even the Father of the World Wide Web, Sir Tim Berners-Lee, has indicated he would change providers if his ISP were to do something like this. There is a somewhat valid point that people have to “opt out” of this service – and no doubt the ability to opt out will be buried in the fine print of the user agreement each new customer will have to sign.

But do they really think that the people running the ISPs and advertisers will be looking at individual records? Net-centric marketers, you may have a public relations challenge on your hand, but I’ve blogged about this before and I believe that the automation of marketing as a mechanism to react to behavioral-based events on the Internet is inevitable. It will be too efficient to ignore, especially when enough data builds up to perform fruitful data mining.

The real privacy invasion would occur if there was a security breach and this type of information was stolen by spammers, who up to this point have marketed using the “shotgun” method, hoping to hit something while blindly “firing” into a crowd. I admit that has high probability of occuring because of a spammer can pay either a hacker or disgruntled employee to obtain the data.

Just as bad would be a “cascading” effect, where marketers decide to take that data and use other channels, such as direct mail and telemarketing to reach new customers. So the data doesn’t just stay on the web in the form of custom served ads – it cascades into other media forms to “invade” our privacy.

But just as we put up with the bane of spam because overall email is important, we will have trade-offs for the benefits of the net-centric marketing world. And I’d rather see an ad that interests me instead of some wierdly dancing woman who’s part of a bottom-feeding mortgage ad…