• Yahoo! is reportedly dumping its 35% stake in Yahoo! Japan, which has a total market value of $19 billion plus $2 billion in net cash. But what about Right Media? Apparently Yahoo! isn’t going to take the money to buy Hulu…

• Call tracker 800response has launched CallFinder, a real-time speech analysis application that scans calls for key phrases.

• Kevin Drew Davis is the new executive creative officer at Digitas Chicago. Last seen serving as executive vice president and group creative director at DraftFCB Chicago, Davis has also fronted creative teams at Wieden & Kennedy, The Richards Group and GSD&M over his 20-year career.

• According to Knowledge Networks’ MultiMedia Mentor research tool, tablet-owner spend an average of 4 hours and 19 minutes on the Internet daily versus 2 hours 55 minutes for all consumers. Fifty-five of those Internet minutes are on their tablets, with 24 minutes going toward social networking, gaming and search. I’m going to guess the other 35 minutes are for p… puppies. Pictures of puppies… Yeah.

• Following taking top prize at TechCrunch’s Disrupt San Fran, Israeli startup Shaker, which hosts virtual bars where your avatar can hang out with Facebook friends (it kinda looks like Meez for older Facebook users…), scored $15 million in a Series A round of funding led by Menlo Ventures. Innovation Endeavors (Eric Schmidt) and CrunchFund (Michael Arrington) also gave to the cause.

• AOL and Yahoo! aren’t the only major websites producing original online video series — eBay Motors has just launched two new series to catch the interest of its 14 million monthly uniques. Sponsored by Ford, “modJOBS” is an eight episode series following the transformation of a stock Ford Mustang GT 5.0 V8 into a pimped-out “supercar.” And hosted by Justin Bell, “World’s Fastest Car Show” is a weekly joyride into the heart of car culture, including test drives, celebrity visits and auto shows.

• Social enterprise software-maker Buddy Media has opened new offices in Singapore and San Francisco. Leading the Singapore office as the first Buddy Media Managing Director of Asia is Ken Mandel, previously regional vice president of advertising sales and marketplace for Yahoo! Asia Pacific. Heading up the San Fran depot is new Senior Vice President of Western Region (U.S.) Sales Carla Bourque, who boasts senior management experience at the likes of Six Apart (acquired by SAY Media), Nielsen Online, Catalina Marketing and Jupiter Media Metrix.

• Self-serve lead generation and targeted email marketing platform Marketfish has expanded its list acquisition service to direct mail campaigns with Marketfish Platform — Postal Edition.

• Multi-threat ad analytics service Adometry has introduced new optimization tools to its Ad Analytics SaaS Solution Suite that accounts for interactions between display and search that affect conversions in calculating optimization recommendations in accordance with campaign goals (e.g., branding, conversions).

• Web and mobile app publisher network Conduit will provide the 65 million uniques heading to online game website Miniclip with the Miniclip Gamebar, a toolbar the informs users of new and exclusive games as well as enabling sharing with other users.

• After surviving the initiation ritual, including battle with the rancor monster, data marketplace eXelate has been admitted to the ranks of the 12-member Council for Accountable Advertising, which was founded by Cross Commerce Media, MediaMath and TARGUSinfo in March of this year. By the way, the council could use another rancor monster if anybody has a source.

• Cross-platform rich media advertising firm Crisp Media has added 3D, video and animation capabilities to its fixed mobile unit Adhesion — these “sticky” ads stay above-the-fold as users scroll on their mobile devices. In addition, Crisp has also launched a version of the unit for the iPad.

• New MySpace owner Specific Media is planning to market the beleaguered social network as the “Hulu of Music.” Check out the pitch deck on SlideShare.

• Retail search engine and mobile app SaleLocator has introduced an API to offer web and mobile developers up-to-date in-store sales information for more than 1,000 national and regional retailers, including an average of 275,000 deals a day segmented by region and/or category.

• Email marketing provider GetResponse launched List Booster to allow clients to import contacts from 16 different services and mail clients, including Gmail, Outlook and LinkedIn.

• Oh yeah, I think Apple had some kind of announcement. Anybody catch it?

Because there’s something about Hulu’s latest consumer-facing video ad service that reminds me of NBC’s infamous amateur talent show. Say I’m trying to watch the latest episode of FX’s “Archer”, but before I can get to the so-wrong-it’s-right animated series, Hulu serves me one of those Geico ads with that frickin’ gecko. I really hate that Aussie-accented lizard. Lo and behold, on the top of the screen are three other ad choices from three different advertisers –

GONG!

Now I’m watching a Bing commercial, marveling at the fact that Microsoft’s advertising campaigns tend to be of such higher quality than its products.

Ad Swap is quite a leap from Hulu’s Ad Selector tool, which let users choose between three different ads by the same brand before the pre-roll played. As a user, this often felt useless because I typically saw all three of those video ads during a session.

However, Ad Swap lets Hulu users truly customize their ad experience to preferably view ads most relevant to them as consumers. The Ad Swap alternatives are based on previously submitted user information (“Is this ad relevant to you?), and likely fresh data from Ad Swap choices and lookalike Hulu users as well.

Of course, if viewers are curmudgeonly as me, they may just give a thumbs up to the ads that least irritate them (or ones that are actually entertaining) rather than products or services they’re likely to purchase. That isn’t a bad thing considering the metrics angle — Ad Swap gives advertisers a better idea what creative is clicking with users, and more specifically the demographics when used in tandem with the data available on Hulu’s viewers. (We’re talking anonymous audience segments, not specific, identifiable users.)

And even if certain consumers aren’t currently in-market for the product, as we note all the time on Adotas, brand awareness is of high importance at the top of the funnel, where video normally shows up. When the consumer does find him/herself in-market, what brands will immediately come to mind? Chances are, the ones with the most enjoyable advertising.

To jump on the earlier example, I’m more likely to watch Progressive’s Flo commercials rather than anything in the Geico docket for two reasons: 1. Flo is charming; and 2. I find Geico’s marketing bombardment near-oppressive. Incidentally, Progressive provides the car insurance for my POS band van.

GONG!

Advertisers who get gonged are not charged for the impression, but hopefully learn how often the ad was gonged and by what type of people in order to better tailor their creative and targeting efforts. (Stomp on that stupid lizard!)

Hulu’s introduction of Ad Swap is also an impressive signifier of the increasing role of video advertising and Hulu’s prominence in the space. A year ago, the chief complaint with Hulu was a lack of ad inventory — the same video ads played over and over during the sessions. Ad Swap suggests the on-demand video service has gotten past this issue, and now features an impressive variety and amount of brands reaching its viewers.

He’d then invite out Ian MacKaye to perform a karaoke duet of Minor Threat’s “I Don’t Wanna Hear It!”

But no, this always happens to me — I hope for MacKaye and get Andy Samberg instead.

I contemplated the grand announcements from f8 over the weekend (with occasional distractions), feeling like I was missing something. At first I thought the deeper integrations with media services like Spotify, Netflix and Hulu meant that Facebook was turning into a media-based portal that would make oldtimers AOL and Yahoo look embarrassingly out of date.

But no — you don’t watch TV episodes on Hulu with your friends through Facebook. You watch a TV show on Hulu, which sends that information to Facebook, which posts that into your ticker and on your profile, where your friends might see it and watch the same thing.

So my eventual take was, “Facebook wants people to share more.” Same old, same old — Zuck begging us to share everything — and especially every online activity — through Facebook. And yet it’s deceptively genius — activities outside of Facebook are instantly part of Facebook. The social network is attempting to ingrain itself a bit further into our digital lives.

Nitty Gritty

The media apps are part of a more comprehensive and customized profile (which hasn’t actually be launched) that looks a bit like a cleaner version of MySpace’s last stand (i.e., the final revamp with the modules — hopefully Facebook’s version is easier to use as I almost punched my computer while I updated my band’s profile this weekend). The new profile offers an intuitive way to navigate and edit activity history, as well as the ability to add important moments of your life into the profile along with media (pictures, video). It’s true profile customization.

The revisions add unabbreviated ways to share what you’re doing outside of Facebook (well, at least online) with the people in your social network. To get all the paranoid talk out of the way, yes, sharing more of this data through Facebook is actually giving them more data to target ads with. (ARGH! The ugly tradeoff for social freedom!) But people were already adding movies they liked, bands they liked and other interests through their profiles — the new apps simply streamline the sharing process.

And it’s all opt in — users make the decision through the various media services whether to link it with Facebook. I think Spotify is great, but I won’t be hooking it up with my Facebook account because I don’t feel any need to share every stupid song I listen to (OK, it’s just “Total Eclipse of the Heart” on infinite repeat) with my social network. If I really like an artist to the point I must give a shoutout, I’ll post a status update (how old fashioned!).

With Spotify in particular, I gotta admit I’m already starting to get sick of seeing what my friends are listening to clogging up my Ticker. At the same time, I was tickled to glance over and see a friend was listening to a song from one of my bands. I could get used to more of that.

Gotta Get an App

From a marketing standpoint, now every media company needs an iPhone app, an iPad app, an Android app and a Facebook app. I’m getting press releases right and left about different media outlets preparing apps. I’ll be very curious how much traffic the apps will drive back to original sites — anyone want to take bets? Surely it will be enough to justify building them.

But it’s not just media companies that need to build apps — in a video promoting the new Apps feature, there’s a shot of a branded Nike app for keeping track of miles run. Just like they do with mobile apps, brands would be smart to build user engagement and brand loyalty through sponsoring social activities tracked and shared on Facebook apps. It’s a new resource for tossing in gamification elements like leaderboards and missions.

In addition, the targeting data for display ads may be better as the sharing increases and is more streamlined. Apparently, the social network is still pushing hard on Sponsored Stories, prompting brands to increase their interactions with fans on Facebook.

User Reaction

When the ticker appeared and the news feed, I could already see the headlines: “Facebook users outraged over new layout! In other news, sun rises, sets.”

The social media age has exposed most Internet users as whiny toddlers that rage at the slightest bit of change. While I admit I’m a bit confused by how the news feed is now organized, I find the ticker quite handy — I found all the bickering in the news feed to be absolutely hilarious. I still remember all the screaming when the news feed was introduced, which might have been the best thing ever to happen to the social network. Exodus? Please — give it a month and users won’t remember life without the current setup.

(I postulate that there was no mass Facebook quitting, besides the 37,000 who left on “Quit Facebook Day,” during the privacy debacle last year because 1. no suitable alternative existed — one does now — and 2. Facebook and Mark Zuckerberg renewed their vows to care about user experience over revenue.)

Of course, the anger over the revamp hit at an opportune time for media contemplation — it’s not clear what’s next for the social network. As the global population on Facebook has topped 800 million and U.S. members account for half the population, it’s hard to imagine it getting much bigger. (Really wish I could see age statistics so I could analyze the rate of youngens joining.)

This isn’t to say Facebook will start shedding members, but it feels like the social mediascape is hitting an inflection point. I’ve suggested before that Facebook would be the default social network the majority of Internet users keep to manage the  in addition users flocked to niche social networks based on their interests.

Facebook still fits the former description — though Google+ may be a more comprehensive solution — but BadgeVille’s introduction of its Social Fabric technology, which inserts a customizable social layer into a website, made me realize that any and every media site could be an interests-based social network.

However, with the eventual proliferation of social layers throughout the Internet, I imagine time spent Facebook — still the most popular Internet destination according to Nielsen — might slide.

That’s why the Apps are kind of fascinating — suddenly time and activities spent outside of Facebook are actually on Facebook. Apps simply shove Facebook a little deeper into our lives. Damn, you’re a clever bastard, Zuck.

VAR KMCID=’Z9iGGN1n1-zeVqbgzrlKkl39hiY’; if(typeof(_kmil) == ‘function’)_kmil();

That’s the contents of the global identifier variable KMCID set when a user hit any site using KISSmetrics’ tracking technology (such as Hulu or Spotify) before July 29 and the third-party script https://i.kissmetrics.com/i.js was loaded. The identifier went into a user’s cache and was impervious to user privacy tools such as cookie-blocking and private-browsing modes. Targeting through eTags had not only arrived, but been in practice by major publishers for some time.

Ashkan Soltani, previously a technologist at the Federal Trade Commission Division of Privacy and Identity protection, has published a technical addendum to a recent report accusing KISSmetrics of using eTags for user tracking that found 31 sites (including Hulu, GigaOm, Spotify, SEOmoz and SlideShare.net) using KISSmetrics’ e-Tag code prior to July 29, and 515 sites using KISSmetrics currently “in a fashion that indicates they were likely also have been respawning until this functionality was disabled.”

While KISSmetrics also appeared to be respawning cookies using HTML5 storage space and Flash cookies, the e-Tag accusation is the most serious because it represents tracking companies’ most significant attempt to circumvent user privacy controls, and may have drastic consequences for a behavioral advertising community already under intense federal scrutiny.

But it gets more complicated… And a lot uglier, as Soltani has broken down the very messy details of the matter.

Quick Flashback

On July 29, Wired’s Ryan Singel detailed the latest findings of privacy researchers Soltani, Chris Hoofnagle, Nathan Good, Mika Ayenson and Dietrich J. Wambach, an update of a 2009 report that discovered numerous publishers respawning HTTP tracking cookies through the use of Adobe Flash cookies (officially known as local shared objects, or LSOs). The new report discovered that the use of Flash Cookies was down, but tracking firm KISSmetrics was empowering numerous publishers to drop cookies in user caches.

Following the report’s release, Scott A. Kamber’s law firm — which has led the charge on about every online privacy lawsuit, including the one that racked up a $2.6 million settlement from Clearspring and Quantcast last year for their use of Flash cookies — filed suit against KISSmetrics, Hulu and a slew of other publishers using KISSmetrics’ e-Tag tracking technology. Although CEO Hitten Shah initially told Singel in the Wired story that the cache cookie assessment was correct, Shah came out with guns blazing in a company blog responding to the charges. In particular, he claimed that KISSmetrics had never used ETags or other “persistent” technologies for tracking purposes.

The weekend after the initial Wired story appeared, KISSmetrics amended its privacy policy to work with browser do-not-track technology and removed any references to the eTag technology from the “How It Works” page. As of July 31, Hulu and KISSmetrics had ceased respawning cookies.

The Trouble With Unique IDs

Because KISSmetrics uses the same first-party cookie — a unique identifier — for the same user on all websites that use KISSmetrics’ tracking technology, in theory KISSmetrics could track individuals across any of these websites (and make a killing in the expanding third-party data market).

KISSmetrics claims it was not doing this. Even without KISSmetrics as a mediator, publishers could trade or buy information about unique users from one another based on the code — publishers are increasingly annexing their data to provide more alluring targeted audiences so they can garner higher CPMs.

“Since the unique identifiers are included the actual URL and not the cookie headers… I can observe their transmission to KISSmetrics servers and suspect each will generate a log entry on their systems,” Soltani writes. “Unless all log data is immediately deleted or truncated, it’s likely that this cross-domain browsing history is available on their systems, unhashed.” He admits that because he has no access to KISSmetrics’ back-end systems, he can’t be conclusive about this practice.

However, KISSmetrics claims that the use of the same unique (and anonymous) identifier was used to cut down on bandwidth use while increasing performance speed; when the IDs came to KISSmetrics, they were instantly “translated into unique identifiers” for each publishing client.

But that doesn’t defuse Soltani’s other point — the publishers themselves follow track users and share data with or sell to each other against user wishes.

The Big Picture

As the online behavioral advertising industry is struggling to convince the Internet-using public that it can regulate itself, the entry of eTags into the tracking fray was a pretty damning indictment against self-regulation.

Given the zeal with which companies continue to develop tracking technology that circumvents user-initiated privacy controls, how can the online advertising industry be trusted to regulate itself regarding user data?

As Bob Garfield put it in AdAge, “Nice work, morons. Way to strangle the goose that lays the golden egg.”

Flash forward to summer 2011 and Soltani’s crew released another report, this time reporting on the same old Flash Cookies practices but also discovering the use of ETags in tracking and respawning. On cue, Scott A. Kamber and his law firm filed a complaint against Hulu and analytics operation KISSmetrics for their respawning games.

Name sound familiar? Scott Kamber was also on the plantiffs’ bench for the suits against Quantcast, Clearspring and Specific. Kamber Law was also responsible for the class action suit against Facebook over its Beacon advertising services that resulted in a $9.6 million settlement. His law firm has filed suits against Interclick for demographic profiling, Google over its toolbar and Apple over mobile apps sending advertisers unique device IDs. He’s all over data privacy issues like butter on toast, the biggest gun in this niche legal town. Ad tech companies have suggested he’s a suit-happy shyster, but his track record isn’t bad  – check out this interview with Kamber by PaidContent.

And Kamber has just filed again — another class action suit (PDF) against KISSmetrics, with codefendants AOL, Spotify, GigaOm, Spokeo, SlideShare, Hasoffers.com, Kongregate.com, Livemocha.com, and even more. Since Soltani whispered (all right, he tweeted) to us the other day that his crew found more than 400 websites with KISSmetrics’ ETag tracking code, Kamber had the pick of the litter when it came to selecting media companies to sue. Other ad tech and analytics companies were also named in the suit, including SEOmoz, Conduit, Flite and visual.ly

Given that Hulu seems to have been caught red-handed using KISSmetrics’ technology to respawn HTTP cookies as well as Flash cookies (the same thing that Quantcast and Clearspring settled over), we’d put our money on a settlement. It’s the other class action suit that should be interesting, since Kamber claims KISSmetrics and defendants’ ”rogue tracking” with ETags and Flash Cookies is a violation of the Electronic Communications Act, the Computer Crime Law of the California Penal Code and the Unfair Competition Law in the California Business and Professional Code, as well as a trespass on personal property.

Respawning is a definite no-no because it goes directly against user wishes, but tracking outside of HTTP cookies is a murky area — perhaps the outcome of this case will present clearer borders.

Presenting the Arguments

At the heart of the suit is the argument that the defendants tracking efforts bypassed browser privacy efforts:

“While it is generally reasonable to expect a website to use cookies for tracking, the Website Defendants and Kissmetrics created numerous, alternative, ‘shadow’ mechanisms for tracking…. Kissmetrics and Website Defendants, however, repurposed the browser cache of Plaintiffs and Class Members’ browser software. They coordinated together so that Kissmetrics stored coded information, specific to each individual Plaintiff and Class Member, in the code used to display the Website Defendants’ web pages. The code had nothing to do with what the user viewed. Like cookies, the code contained tracking information.”

In a response to the Soltani report and the lawsuits, KISSmetrics CEO Hiten Shah claims that his company has never used ETags or other “persistent” technologies for tracking purposes and that its technology cannot track users across multiple websites — it’s just a small company (17 people!). He says that Soltani’s work is full of speculation and distortion of KISSmetrics’ business, while suggesting that Kamber’s firm (which isn’t named) has bullied settlements out of other ad tech companies.

Interestingly, Shah comments: “Mr. Soltani also claims that it is somehow improper to use any technology other than browser cookies to track website activity. In fact, countless online companies, including other major analytics providers, use a variety of different technologies to provide these services, including the persistent technologies Mr. Soltani targets in his paper.”

Alas, Wired’s Ryan Singel says that KISSmetrics reworded the “How It Works” page to make no reference to the ETag technology; according to the site, KISSmetrics only uses first-party cookies. Shah acknowledges that the company has added support for “Do Not Track” technology last weekend.

The Gap Between DNT and OBA Self-Reg

This class-action lawsuit basically sits right in the gap between “Do Not Track” advocacy and industry self-regulation initiatives regarding online behavioral advertising. The idea behind self-regulation is that users can opt out of behavioral targeting through tracking cookies. However, tracking cookies are still used for internal advertiser and publisher metrics, such as frequency capping and understanding visitor behavior. This was something the kids at the Stanford Security Lab didn’t understand when they accused companies signed up with the National Advertising Initiative of tracking despite an opt out.

You can doubt the validity of the claim that advertisers turn off the behavioral targeting functions when users click on the Ad Choice icon and opt out, but industry self-regulation initiatives do have enforcement mechanisms (though how “tough” they are regarding violations isn’t clear — feel free to illuminate the punishment for non-compliance).

Media companies and ad tech service providers claim they want to use Flash Cookies, ETags and other “persistent” tracking tools to have longer-lasting beacons for analytics purposes, not behavioral targeting. They would therefore claim it’s harmless tracking.

The privacy advocate argument is that there’s no nuance — tracking is tracking, and the use of Flash Cookies or ETags is especially heinous because they circumvent user privacy controls.

Who is right, who is wrong? That’s not my place to decide — we’ll see what the legal system says. But the decision will have ramifications for the data privacy landscape, offering a precedent on whether online tracking is a tiered system.

A new front has opened up in the tracking cookie battle. A follow-up report from the same researchers (including independent privacy advocate Ashkan Soltani and privacy lawyer Chris Jay Hoofnagle) that called out Quantcast and Clearspring for re-building HTTP cookies in 2009 through the use of Adobe Flash cookies has discovered that Hulu (one of the publishers fingered last time) had been using both Flash and cache cookies to respawn cookies and create ever-persistent, hard-to-delete tracking tools.

Cache cookies? You mean ETags?

Yes — long speculated about, it seems at least one major publisher has been employing entity tags (or ETags) for tracking consumers with “persistent” cookies (Evercookies?) and respawning deleted HTTP cookies. As current Googler Dean Gaudet explained all the way back in 2003, this method ”attempts to get the browser to store unique ID information in its cache in a manner which will be communicated to the server at a later date.”

ETags stay good for a long time, aren’t typically flushed with a cookie purge (but can be removed through clearing the browser cache) and can report data across multiple browsers since they’re not limited to one. According to Soltani, the code works even if cookies are blocked and private-browsing is enabled.

Respawning is a big no-no — Violating consumer wishes? You oughta be ashamed! — but the use of ETags simply shows that, once again, companies tracking consumers have found another way to fly under the radar and dodge transparency.

At a time when privacy advocates are frothing at the bit, the government is contemplating legislation and/or regulation, and the Internet-using public in general has no clue if online privacy actually exists, Hulu essentially tried to a pull a fast one on its users through the technology of analytics company KISSmetrics.

What Hath Hulu Done?

Hulu was employing Flash cookies for cookie respawning (and not for the first time), but the practice was in-house this time instead of performed by a third party such as QuantCast. In addition, the company also used ETags provided through KISSmetrics code to respawn cookies and track users.

Ryan Singel on Wired explains that ”when a user visited Hulu.com, they would get a ‘third-party’ cookie set by KISSmetrics with a tracking ID number. KISSmetrics would pass that number to Hulu, allowing Hulu to use it for its own cookie. Then if a user visited another site that was using KISSmetrics, that site’s cookie would get the exact same number as well.”

The report notes that the script used  ”includes other code that indicates its author is aware of tracking and the risk of data collection about the user. For instance, it includes a function to detect the collection of information that credit card companies require websites to control more carefully.”

The researchers are particularly disturbed by the use of ETag because they claim to avoid this practice, a user would have to flush his/her cliche between website visits.

Before Wired published coverage of the Soltani team report last Friday, Hulu updated its privacy policy to explain its use of Flash cookies, including links for consumers to manage LSOs. It also announced it had severed ties with KISSmetrics.

In response to the report, KISSmetrics tweeted a link to this page on its website:

“As of July 30, 2011 KISSmetrics uses standard first-party cookies to generate a random identity assigned to visitors to our customers sites. This identity by itself does nothing. Consumers can clear these cookies to clear the randomly generated identity KISSmetrics generated. What information is tied to that random identity is controlled by our customers.”

In other words, We have no idea what that rogue company was doing with our technology!

Not surprising, Soltani called BS. The insinuation is that KISSmetrics at least explained to Hulu how the company could use its code as a tracking ETag, but there’s certainly no smoking gun — plausible deniability can be a beautiful thing.

Cookie Crumbs

Soltani and crew’s study uses a different methodology from recent Carnegie Mellon research that found only 20% of the 100 most traversed websites using Flash cookies only two of those were using them to respawn cookies. While that study only examined homepages, Soltani et al. attempted to recreate browser behavior by making 10 clicks on same domain within a session.

On the top 100 sites (including government ones), the team discovered 5,675 HTTP cookies — a significant spike from the 3,602 found in 2009 –with 4,915 placed by third parties. (Before you’re all aghast about tags slowing loading time, consider technology like TagMan’s recently introduced Smart Tag Loading.) The biggest cookie depots were wikia.com (242), legacy.com (230), foxnews.com (185), bizrate.com (175), drudgereport.com (168), myspace.com and time.com (both at 151). Google had a cookie presence on 97 of the top 100 sites (89 with Google cookies and 77 with DoubleClick cookies).

The report also notes that 17 of the 100 most popular sites used HTML5 storage cookies, which the researchers believe will become a universal tracking tool. With 5 megabytes of data storage abilities, HTML5 storage are much larger than the other methods (4 kb for HTTP cookies and 100 kb for Flash Cookies), but what concerns Soltani and crew is that the default expiration setting is permanent. Unlike HTTP cookies, which have expiration dates, HTML5 storage cookies can remain in place until a user decides to dump the cookie bin.

Down from 281 in 2009, Soltani and crew found 100 Flash cookies on the top 100 sites. The researchers’ 2009 report claimed that — for numerous major publishers including Hulu — Clearspring and Quantcast were recreating cookies after users deleted them by storing code in Flash cookies. That ended in a class action lawsuit that Quantcast and Clearspring settled for $2.4 million along with a promise not to engage in that practice again. A similar suit against Specific Media was dismissed earlier this year.

Adobe prefers the term “local shared objects” (LSOs) to Flash cookies. Designed to support web technologies such as Flash Player and browsers employing HTML5 LSOs save small pieces of information such as logins or preferences locally on a computer rather than on a site’s server. Many publishers claim to use Flash cookies for internal metrics rather than tracking purposes for advertising, taking advantage of the fact they are saved in a different location than HTTP cookies.

Since the Soltani and crew report, numerous browser add-ons have appeared for cleaning out the Flash cookie stash while Adobe worked with Mozilla and Google to build a new API for clearing LSOs from a browser as well as plugins that install the API.

However, the Soltani team makes the bold claim that the use of Flash cookies is “functionally equivalent to respawning…. Whether or not a website respawns, if it uses Flash cookies, it can uniquely and persistently track individuals even in situations where the user has taken reasonable steps to avoid online profiling.”

Arms Race

“Part of our point here concerns the arms race between trackers and consumers,” Hoofnagle wrote in the Wired comments section. “Although the industry has stated in principle that individuals should be able to opt out, they have defined the opt out very narrowly, and in this case, made it impossible except for weirdos like us to block it!”

Yes, the industry is trying to narrow the parameters of the debate to behavioral targeting. As stated before, respawning is bad voodoo in everybody’s book — including industry self-regulation efforts — but tracking is a more nuanced practice than the critics give credit for. Consider the big blowup with Stanford Security Lab last week over cookies.

Arguably, consumers that use Do Not Track technology will receive irrelevant ads (and the same ones over and over) that they will ignore — and banner blindness is a big enough problem as is. If enough consumers were to sign up with the Do Not Track program, it could potentially cause CPMs to drop even lower and sink publisher revenue.

Singel comments that, “if a user came to Hulu.com from an ad on Facebook, and then later, using a different browser on the same computer, visited Hulu.com from Google, and then at some point signed up for the premium service, KISSmetrics would be able to tell Hulu all about that user’s path to purchase (without knowing who that person was).”

That’s attribution gold right there. However, Singel also notes that ETags could enable data sharing (even PPI) among multiple sites — not that anybody is doing it, just that it’s possible. It’s arguable that holistic government regulation could keep this in line as it doesn’t seem industry self-regulation efforts go far enough.

But more and more, a best-of-all-worlds solution seems to be ditching the opaque cookie-dropping practices and letting consumers opt in — allowing them to trade user data for content. It could certainly solve the transparency issue.

Last week, Fox furthered this hypothesis by announcing that the online versions of its TV shows would feature just as many commercials as the broadcast versions. And dammit, I have to see what happens on “House” — you never know what kind of crazy procedure that lunatic doctor is going to order next….

With increasing amounts of long-form content available online, expect more “mid-roll” ads. In analyzing data from 5.5 billion ads served during online videos from premium content makers like Turner, ESPN and (of course) Fox, FreeWheel noted a 30% increase in mid-roll video ads, most-often placed in long-form content, between 1Q 2011 and 4Q 2010. The company attributed this hike to higher levels of long-form content online as well as increasing ad loads.

Notably, mid-roll ads have the highest completion rates — but in general video ads in long-form content have high-completion rates because consumers are more engaged and likely to finish viewing both the content and the ads tied to it. Yup, mid-roll reaches that captive audience many television programs enjoyed before the advent of TiVo.

Another interesting finding in FreeWheel’s just-released first-quarter video monetization report, mobile video views account for less than 1% of all video views, and 80% of mobile views are from Apple devices.

At first I was stunned by the numbers… But then I remembered that a year earlier comScore reported 178 million uniques watching a total of 33.2 billion videos in December 2009.

The stats stayed about the same between November 2010 and December 2010, but back in October 175 million U.S. uniques were watching an average of 15.1 hours per viewer — comScore noted at the time that Hulu served a billion video ads as the fall TV season got rolling. July 2010 and August 2010 both saw 178 million unique U.S. viewers and an average of 14.5 hours of video per user.

It’s not unreasonable to suggest slacking video viewage during the holiday season — People want to spend time IN REALITY with their families? Crazy! But also consider formerly free, all ad-supported Hulu, which began testing its subscription service in June and then cut the price from $9.99 to $7.99 a month in late October.

Hulu slipped from about 30 million uniques to 27 million between September and December, but the average viewing time per user jumped from 162.6 minutes to 217.1. Indeed, the average length of a video has jumped to 5 minutes in December 2010 from 4 in December 2009.

As usual, in December 2010 Google sites were on top of the video heap (thank you, YouTube) with 144.8 million uniques, nearly 2 billion sessions and an average of 274.3 minutes per viewer, an increase from 260.4 minutes in September 2010 (all the other stats were about the same). Yahoo sites took the far-back second place with 53 million uniques, 191 million sessions and an average of 30 minutes per user — bit of a slip from 54 million uniques, 240 million sessions and 31.5 minutes per viewer in September.

Upstart music video site VEVO, launched only a year before, heralded 50.6 million uniques with 266 million sessions and an average of 90 minutes per user. Facebook took sixth place with 41 million uniques, 124 million sessions and an average of 14.6 minutes for each user.

Video ads made up 16.4% of all videos viewed and 1.6% of all time spent viewing, up from 12.3% and 1.2% in September. On average video ad reached 49% of the U.S. population (not just Internet users) 39.8 times during a month — U.S. users watched 5.9 billion video ads in December.

Hulu served more than 1.2 billion ads, trailed by Tremor Media with 1 billion ads served, Adap.tv with 682 million and BrightRoll with 588 million. For video ad networks, Tremor Media took top honors in terms of reach (51.4%), followed by BrightRoll with 40.6% and Break Media with 39.7%

So while the number of U.S. unique viewers has dropped from last year, it seems to have stabled. However, it seems consumers are spending more time watching videos, a growing percentage of which are ads. The small slip in reach is disappointing, but the increase in engagement is intriguing.

So what’s in store? Here are my top five predictions for online video advertising in 2011:

1. YouTube will reign as the top video advertising network. YouTube is all about mass reach and already controls about 40% of the online video advertising inventory. As the video site adds more pre-roll in its quest to prove its value to the Google coffers, it’s poised to dominate as an ad network. YouTube’s leadership position will put even more strain on the currently fragmented market and result in further consolidation among ad networks.

2. Hulu will abort its IPO. Any talk of an IPO is tantalizing fare for a market eager to move into more bullish times. However, the big news is that Hulu’s plan to go public won’t materialize — the broadcast networks just won’t let it happen. Here’s a more likely scenario: Comcast buys out the other partners and makes Hulu the anchor to its “TV Everywhere” efforts — the so-called consumer-friendly approach to holding the line between free and paid TV on the Web.

3. Brand advertisers will realize that young influencers are unreachable on TV. It was a long and largely happy marriage, but the split was inevitable. Brand advertisers -– at least those targeting 18 to 34-year-olds –- will accept, finally, that Internet devices have largely replaced the TV as the central source for entertainment and information among this key demographic group.

4. Online video will power the connected TV. Connected devices are here. And people will continue to watch TV as usual. What’s new and interesting is the interactivity that will manifest in two ways: on-demand entertainment and short-form video discovery. Bringing the engaging entertainment experience of short-form video to the living room will be the driving force that brings advertising dollars to the connected TV.

5. Brand advertisers will shift dollars to online video faster than quality online video inventory will grow. P&G, Unilever and other top advertisers – especially those targeting youth audiences — will shift meaningful dollars from TV so quickly that online video CPMs will significantly increase due to basic supply-and-demand economics.

So, what do these predictions mean collectively? 2011 will be a landmark year for the online video advertising industry.