Claire Beale on Advertising

They know where you browse, but is online spying the way forward?

While most media are crouching, buttocks clenched, praying that recession won't bite, all things digital are roaring ahead.

There are new stats to prove it. Online advertising is now the third-largest advertising medium in the country, topping £2.8bn. That's bigger than press classified advertising – in part because it's eaten into press classified advertising. It's also bigger than regional newspapers. In fact, online advertising has grown nine times faster than the ad sector as a whole. It's all terribly impressive.

Still, ask yourself this question: what's your favourite internet ad? Which banner or skyscraper is so enticing, looks such fun, that it stops you in your searching tracks, compels you to put aside your eBay compulsion or halt your holiday hunt in order to purr over a new microsite trying to sell you a car or a mobile phone?

I can't think of one myself. Or at least I can't think of one that I've ever actually seen as I've been pootling around the web. I've seen some great internet ads on press releases and on awards entries, but I've never naturally stumbled across one. I must be using all the wrong websites.

Anyway, imagine if the only ads you saw on the web were for things you were actually interested in. It's coming; behavioural targeting is the next leap forward for web advertising, and it is already proving controversial.

You may have read BT's recent confession that it carried out secret trials on 18,000 broadband customer accounts to examine web traffic and then to serve targeted ads on a number of websites.

Now, leaving aside for the moment questions of legality (according to the Regulation of Investigatory Powers Act, it's an offence to intercept web traffic without warrant or consent), the consensus is that this type of carefully targeted advertising will transform the internet's role as a commercial tool.

BT's test was conducted with a technology company now known as Phorm. Interestingly, if you search for Phorm in Google, the second listing you'll find is for a site called badphorm.co.uk, a sort of anti-Phorm site.

Basically, Phorm is collaborating with the UK's three biggest internet service providers – BT, Virgin Media and TalkTalk – to offer target advertising: ads that are tailored to the lifestyles and interests suggested by the things you choose to look at online. The service can profile your browsing behaviour, though it says it does this without storing any personal information that could identify you.

Hugo Drayton, Phorm's UK chief executive, says his company's Open Internet Exchange (OIX) system offers "improved yield and volumes for publishers; improved targeting and ROI [return on investment] for advertisers; more relevance, enhanced privacy, protection from fraud, plus an improved online browsing experience for consumers".

Badphorm.co.uk sees things a little differently: "Three of the UK's largest ISPs have decided to sell your private browsing history to an advertising broker." It calls on Phorm to make its service explicitly opt-in, rather than opt-out. A recent leader in this newspaper on the subject of services like Phorm said: "It is vital that consumers' right to privacy is protected. Service deals should be transparent. Users should not be forced constantly to consider the secondary implications of going to any given website."

Passions are running high. Tim Berners-Lee, inventor of the world wide web, has waded in, warning that tracking someone's internet usage could be put to damaging use. But the rise of the internet means that advertisers and media owners will continue to exploit its potential as much as legally permissible. It's naive to think otherwise.

Remember, all advertising is targeted – to varying degrees of effectiveness. The ads in The Independent are there because the advertiser in question wishes to talk to free-thinking, young (in outlook, if not always in fact), affluent consumers. The media industry spends millions every year trying to work out what sort of people use which media.

But the ad industry desperately needs a formal code of conduct on the issue of behavioural targeting on the web. Leaving it to individual ISPs to decide whether customers must opt in or out of systems like Phorm will make for a bumpy playing-field.

The Internet Advertising Bureau, an industry body, plans to create a taskforce to broker a set of standards on behavioural targeting. But this won't get started until autumn – at least one lifetime on planet digital.

Getting the right ads to the right people the right number of times is a laudable goal, but the process demands responsible behaviour. That responsibility is not just carried by companies like Phorm, but by all the media and advertisers taking part.

* I ADORE Kevin McCloud. Never have bricks and mortar elicited such drama, or such warm humanity. He's a poet amid the rubble of TV's home-improvement presenters.

And next month he's going to be building his own home, live on Channel 4. If past Grand Designs projects are anything to go by, this week-long special won't get much past digging a few holes, but never mind; apart from Kevin, the most interesting thing about the show might well be the ad break.

Channel 4 is using Grand Designs Live to create a themed commercial break. It has tried this trick before; last autumn, it ran a retro ad special in the break between its 25th-anniversary programming, and an environment-themed break around its Dumped investigation last summer. But it has never done a special break during peak-time. And, as Grand Designs is consistently one of the channel's best-performing shows, advertisers can be assured of healthy exposure.

The idea is that advertisers whose brands uphold a strong design ethic will pile into the same ad break, with special idents to flag that this is no ordinary commercial interlude. Dyson, Smart cars and Nintendo have signed up so far.

This is the sort of commercial initiative we can expect to see more of. It gives the broadcaster something new to sell (at a premium, too), and it just might be compelling and surprising enough to stay those zapping fingers inclined to skip the ads.

The trick is to make sure that these attention-grabbing breaks remain special enough that they don't become wallpaper – and that they reward the viewer for their attention. Let's hope there are some great ads to do justice to the fanfare.

* I'D LIKE TO suggest another themed ad break for Channel 4: ads that you really want to watch. I can think of enough to fill a break. Just. And I'd definitely pay attention. Unfortunately, if Channel 4 went for this one, I suspect that they'd have rather more difficulty filling every other ad slot they've got.

Claire Beale is editor of Campaign