You're not paranoid if it turns out Big Brother is actually watching you.

That means that if you are a Verizon (NYSE:VZ) wireless customer you can rest assured that those eyes you feel following you around the room are actually a tracking cookie. The company uses the controversial (but legal) mechanism to monitor which sites people visit and all sorts of other data to help it serve ads.

Verizon's actions are not unique. Lots of companies track Internet behavior in order to serve targeted ads, but the company's actions are more egregious than many and also expose their customers' personal info to hackers, according to Pro Publica:

Privacy advocates say that Verizon and AOL's use of the identifier is problematic for two reasons: Not only is the invasive tracking enabled by default, but it also sends the information unencrypted, so that it can easily be intercepted.

It's a practice frowned upon by privacy advocates -- especially because the cookie is turned on by default and few users actually know it's there or how to turn it off. The company, of course, tells subscribers what it's doing in its privacy policy, but you have to assume that very few people actually read the fine print.  

Disclosing its tracking efforts in a way that almost no customers are likely to notice lets Verizon learn everything from "gender, age range, and interests" to "Web browsing, app usage, and location." If you find that disturbing, hang on, it just got worse.

What is Verizon doing now?
The phone company/wireless provider recently bought AOL and it's bringing its tracking efforts to its new purchase. Now the company will be sharing data with its online subsidiary. The company detailed how it works in the privacy policy:

These programs use online and device identifiers, including AOL browser cookies, ad IDs from Apple and Google, and one created by Verizon, known as a "Unique Identifier Header." When the Verizon and AOL programs are combined, this Verizon identifier will be inserted in certain Web traffic that is sent only to Verizon companies (including AOL) and to certain partners. These partners will be authorized to use the Verizon identifier only as part of Verizon and AOL services.

Of course, Verizon isn't doing this to improve your Web-surfing experience. The company admits it will "use these identifiers to help make our advertising programs better." It lists exactly what it means by that:

  • Linking Verizon advertising program information to information AOL has, to provide more personalized advertising.
  • Connecting app and web browsing activity so ads linked to your interests can appear in both.
  • Helping to determine that different devices have the same user so AOL can deliver better advertising in more places. 

So, without their actual consent, Verizon is keeping tabs on its customers in order to better exploit them. That's a slap in the face that you actually pay for the privilege of receiving.

Why is this bad?
In addition to being an invasion of privacy that's legal due to implied rather than implicit consent, Verizon may also be putting customers' personal data at risk.

As Deji Olukotun of Access, a digital rights organization, told Ars Technica: "It's an insecure bundle of information following people around on the Web." 

What can you do?
While Verizon puts everyone into the tracking program as a default setting, it is possible to opt out. The company details how to do so on the same privacy policy its customers are unlikely to ever visit:

The privacy of our customers is important to us, and if you don't want to participate in these programs, you don't have to. You can opt out of Relevant Mobile Advertising by visiting your privacy choices page in MyVerizon or calling 1.866.211.0874...You can see your participation status and makes changes at your privacy choices page in MyVerizon.

It's hard to see exactly how important Verizon sees its customers' privacy when it violates it as a default setting.

Verizon needs to change this
Instead of making its program even more invasive, Verizon needs to place the option to opt in directly in front of its customers. If being delivered more targeted ads is something people truly value, then they will have no problem sharing their data and will choose to be a part of the program.

Tracking people because you're legally allowed to, due to a loophole that allows you to make tracking a default choice people have to opt out of is bad business. As customers learn they are being tracked, it's likely to leave a bad taste in their mouths and some will go looking for providers that don't spy on their customers for their own benefit.

Verizon will lose some data by making this an opt-in program rather than being quiet about its existence and making the opt-out choice less than easy to find. That might hurt its ad business in the short term, but it would be a major sign of good faith to its customers.

Daniel Kline has no position in any stocks mentioned. He offers a shout out to Rockwell. The Motley Fool recommends Verizon Communications. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.