How far should Internet advertising companies be allowed to go in collecting data about consumers?
Your opinion now matters more than ever.
One day after online advertising giant
surprised the Internet community by suspending its plan to match names with anonymous user data to pinpoint ads, market watchers said consumer sentiment would play a big role in drawing the red lines of Internet advertising.
"There's a lot of speculation about what consumers will tolerate, and we want to research exactly where consumers are on this issue," said Rich LeFurgy, chairman of the
Internet Advertising Bureau
, a leading nonprofit online advertising association. "The subtext of what's going on is that the industry is coming together to figure out how to put the consumer in control of his or her privacy."
A strong consumer backlash could have a major impact on the way such online advertising companies as DoubleClick,
In order to avoid a consumer uprising as well as government regulation, the
Network Advertising Initiative
, a union of 12 companies, including DoubleClick, 24/7 Media and Engage Technologies, has been working on an industrywide standard that will for the first time set guidelines for acceptable practices in online advertising. The principles of the initiative will be released in the next few weeks and are expected to represent the industry's basic rules for collecting data about Internet surfers.
"The bottom line is that every Web site will have to disclose their policy and that there will be an opt-out option for anonymous profiling," said Kathleen Kreis, a spokeswoman for Engage. Such an option would probably satisfy consumer advocacy groups, which want consumers to have the right to decide whether they are tracked.
The initiative could also help avoid interference by the government so long as it meets the
Federal Trade Commission's
approval and most advertisers abide by the guidelines.
After the first guidelines are set, the crux of the debate will likely turn to whether companies should be allowed to match names with anonymous data they collect as Internet users surf from site to site. Currently, there is no law that prohibits such activity. Although consumer privacy advocates have always been concerned about how far companies were going to track consumer behavior, DoubleClick raised a red flag when it announced its acquisition of
The purchase of Abacus, the country's largest catalogue database company, meant that for the first time an Internet advertiser could potentially match names and other personal information to the anonymous information it collected online. By doing this, DoubleClick could learn that User X was actually a single guy named Joe who parks his BMW outside his two-bedroom apartment at 123 Main Street in Chicago. In turn, such information would be very valuable to companies that wanted to hone their online advertising efforts when pitching products to Joe.
The stock market applauded the acquisition and the value it expected Abacus would add to DoubleClick's growing treasure chest of consumer data. But a few months later, when DoubleClick disclosed that the Federal Trade Commission was investigating its practices, investors dumped DoubleClick as they wondered whether the company's practices would be so intrusive that they would invite government intervention.
Since then, DoubleClick's share price has continued to slide. But Thursday's announcement helped buoy DoubleClick's stock as well as open the floor for debate about what consumers want from Internet advertisers.
Such companies as Engage said they did not believe Internet users would ever tolerate matching names to anonymous data. And consumer privacy advocate Ari Schwartz, a policy analyst for the
Center for Democracy and Technology
, equated such matching practices with companies' being allowed to put a bar code on consumers in order to watch their every movement, not just track them according to the purchases they make.
But many other advertising industry officials disagreed. They said that if the industry did a better job of explaining the benefits of personalized advertising, consumers would willingly choose it.
"I think consumers will allow such practices once they understand the benefits they can get from them," said Mike Donahue, executive vice president of the
American Association of Advertising Agencies
. "We have to educate the consumers."
Whether consumers like the idea or not, Internet advertising companies will probably be allowed eventually to match names and personal data without having to ask the permission of Internet surfers. After all, offline data-collection agencies are already doing this in a limited way by tracking people as they make purchases on credit.
"If you go to buy a car or clothing, you are being tracked and the only way to opt out is if you call an 800 number," said Safa Rashtchy, an analyst at
U.S. Bancorp Piper Jaffray
. "To change that online would create a lot of problems because you can't have two standards."
He added, "Big Brother has already been watching you offline."