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Once upon a time, companies like DoubleClick (DCLK) and Engage (ENGA) fought for the right to target particular Internet ads at specific people.

Now they're not quite so picky -- and investors aren't nearly as interested. As a matter of fact, the history of targeted Internet advertising, including a courtroom development last week, is a tale of how the supply-demand relationship in Internet advertising still isn't working in the sell side's favor.

One can't help thinking about the extent to which the online advertising market has changed, given the news late last week that DoubleClick had agreed to settle a raft of class-action lawsuits filed two years ago -- lawsuits that pitted the company's desire to collect data about Internet users against crusaders for privacy on the Internet.

At the time, it was believed that the ability to target ads according to the behavior and interests of individual Internet users would mean billions of dollars of additional revenue for companies, such as DoubleClick, which were selling online advertising. But now that DoubleClick is settling, the angst and noise generated over the targeting issue seems to have been all for naught.

Sure, advertisers still would like to target online advertising at appropriate audiences. Yet the diminished size of the economic opportunity provides one more lesson to investors that great expectations for new technology and new ways of doing business often don't lead to great profits.

Market Cap Splats

Consider one set of relevant numbers. Back in early 2000, DoubleClick's market capitalization was north of $12 billion; today it's worth $1.6 billion. Engage, which was developing its own database of Internet users suitable for targeted advertising, had a $6 billion market cap; now it's one-20th that size, around $50 million.

All Too Familiar
Net media stocks' plunge

At the time, Engage had just launched products based on its collection of 52 million anonymous Internet profiles -- profiles advertisers would want to use to surgically target their advertising messages. The company dropped that operation and its other media businesses about a year and a half later.

DoubleClick, meanwhile, reaped more than half its $110 million in revenue in the first quarter of 2000 from advertising sales, and had just completed its $1.7 billion acquisition of catalog database firm Abacus Direct, in the hopes that it could combine Abacus purchasing data with Internet usage data collected by DoubleClick.

For the first quarter of 2002, DoubleClick is forecasting revenue of $82 million, with only a fifth of that coming from media sales.

Here's Why

What happened? In part, it was the dot-com flameout. What looked at the time like steadily increasing advertising revenue was actually just cheap venture capital-provided money looking for places to be spent. When the VCs disappeared, so did the ad spending.

But what was also going on was the "good enough" theory in action. If the product that a customer is using is good enough for his purposes, it's an uphill climb to make him pay more for something that does more. In the world of stock quotes, it's why so many people get delayed quotes for free rather than real time; in the world of advertising, it was why advertisers preferred to spend a certain amount of money per ad to run them with shotgun accuracy rather than spend more per ad for sharpshooter style.

TheStreet Recommends

So what type of targeting is good enough for advertisers right now? Well, to some extent, it's simply content-related advertising. Want to reach women? Advertise on

iVillage

(IVIL)

. Want sports fans? Try

SportsLine.com

(SPLN)

. Want technology buyers? The obvious choice is

Cnet

(CNET) - Get ZW Data Action Technologies Inc Report

.

Meanwhile, DoubleClick, being the good actor it always said it was, promises to further educate consumers about online privacy, to secure people's permission before associating people's surfing history with personally identifiable information, and to refrain from engaging in privacy-related doubletalk.

These are all good things. But there's so much less at stake than there was two years ago.