Yahoo! says it won't target you… to your face. On Aug. 8, the Internet giant announced that it will allow users to opt out of behavioral targeting on its site. But in fact, that change only affects behaviorally targeted ads that users see. The company will still collect information on the Web sites visited by unique computers, it just won't serve ads to individual users based on the info.

"This isn't rejecting cookies outright, you are just preferring not to see the ads," says Anne Toth, Yahoo's head of privacy and vice-president of policy.

So Yahoo (YHOO) will still know that you looked up Fannie Mae's stock on Yahoo Finance and then checked out foreclosed homes on Yahoo's real estate site. It just won't serve you a mortgage ad based on that info when you're checking e-mail. It will also still serve ads to you based on your location and the content of the page that you are on.

Toth says Yahoo must keep the information to report accurate financials on advertising click-through rates and visitors. It probably also wants to tell advertisers about the kind of people who visit certain pages, in aggregate, to sell more expensive advertising. Behavioral targeting can more than triple the price of some ads.

Congressional Pressure
The move came in response to congressional action. On Aug. 1, the House Energy & Commerce Committee sent a letter to 33 companies, including AT&T (ATT), Comcast (CMCSA), Google (GOOG), Microsoft (MSFT), and Yahoo, opening an inquiry into their practices for collecting and using data to target ads to consumers based on what they do online.

Behavioral targeting is different from other kinds of targeting, such as search targeting or geotargeting, which uses IP addresses or Zip Codes that people provide when they sign up for a site. Behavioral targeting works by tracking surfers as they move around the Web. Companies then apply sophisticated algorithms to that past behavior to decide what kinds of ads to show the people they're tracking.