DoubleClick Exec Says Privacy Legislation Needn't Crimp Results

A key senior vice president contradicts recent gloomy predictions.
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The worst-case scenario for DoubleClick (DCLK) may not be so bad after all.

The Internet advertising company has suffered a barrage of negative publicity recently over the information it gathers on people's online activities. News that the

Federal Trade Commission

is conducting an

informal inquiry into the company's data-collection policies was among the developments that prompted a 23% decline in the stock's price over the past week. (It rose 1 47/64 Wednesday to close at 85 55/64.)

But at a Wall Street conference Wednesday, a DoubleClick executive at the eye of the data-collection storm told investment professionals that even the worst outcome for DoubleClick wouldn't present a major hurdle to its business plans.

Rocket Science

Jonathan Shapiro, senior vice president and head of the company's

Abacus Online Alliance

, told a group of attendees at the

eMarketing2000

conference hosted by

C.E. Unterberg Towbin

that DoubleClick would be able to find a way to operate under stricter privacy rules. "It's not rocket science," Shapiro said. "It's execution."

Shapiro's comments come in the wake of assertions by activists and at least one senator that, to protect people's privacy online, DoubleClick and other online marketers should be restricted from continuing current information-collection policies. That hasn't sat well with DoubleClick, whose president

suggested last week that such restrictions would hurt the company and threaten the financial health of all Internet companies relying on advertising revenue.

As part of its strategy to help marketers finely target their advertising messages, DoubleClick is in the process of merging anonymous profiles of the online behavior of millions of Web surfers with information from its recently acquired subsidiary

Abacus Direct

. The company's goal is to tie as many of the anonymous online profiles as it can to its Abacus database, which details the names and off-line purchasing habits of millions of consumers.

Opting Out

At issue is how easily DoubleClick will be able to attach names and addresses to its anonymous online profiles. The company hopes it will be able to continue its current "opt-out" process. Under that procedure, if people register by name at DoubleClick's

NetDeals contest site, or at a Web site in the Abacus Online Alliance, DoubleClick can start collecting information about that person's Web activity and can link that information to offline data gathered by Abacus Direct about that person -- assuming the person has been sufficiently warned and hasn't specifically refused the arrangement, or "opted out." (The company doesn't plan to disclose what sites are in the alliance, a spokeswoman says.) In contrast, the privacy bill that Sen. Robert Torricelli (D., N.J.) introduced this month would prevent DoubleClick from collecting personally identifiable information unless surfers have "opted in," or specifically agreed to the arrangement.

But even if DoubleClick were required to switch from opt-in to opt-out, the company wouldn't face an insurmountable problem, according to Shapiro. "If we have to go to opt-in ... we'll get people to opt in," he told a small group of investors at a breakout session.

Asked how the company would be able to do this, Shapiro made it sound like no big deal. "You'd do a value exchange," he said, outlining a scenario in which the company could easily get 20 online merchants with which it does business to each contribute a $10-off offer to a coupon book. Then DoubleClick could use that coupon book as an incentive to have online consumers opt in. The merchants, not DoubleClick, would absorb the cost of the coupons, and consumers would benefit by receiving a $200 value, he said.

Lifting the Gloom

Shapiro's comments stand in contrast to the gloomy statements made last week by DoubleClick President Kevin Ryan, who said if companies were forced to get Internet surfers to opt in, "it would be extremely hard for the Internet to be successful." Ryan may have been talking about having to get permission even to create anonymous online data, not just personally identifiable profiles.

But a reading of Torricelli's bill, as well as an FTC complaint filed by the

Electronic Privacy Information Center

indicates that proponents of opt-in want it only for personally identifiable information. "If there's a realistic assurance that the information collected will remain anonymous and not be tied to an actual identity, there is no real need for an affirmative opt-in," says David Sobel, general counsel for EPIC.

In a further indication that opt-in isn't a life-or-death issue for DoubleClick, Shapiro said the company wouldn't have to personally identify all the now-anonymous surfers in its database before the Abacus information would be useful. What DoubleClick will be able to do, he said, is to use a sample of identifiable surfers -- for whom it has personally identifiable purchasing histories and online habits -- to make an educated guess at the buying habits of surfers who remain anonymous. DoubleClick believes that tactic will be possible using information from about 5 million personally identifiable Internet users -- a sample size the company hopes to amass by the end of the year. So far, the company has between 100,000 and 200,000 profiles in its combined off-line-online database, Shapiro said.

But that doesn't mean the company would be ready to quit after collecting 5 million of these profiles. "We would like to, over time, learn who people are," Shapiro said.

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