DoubleClick

(DCLK)

, the Internet ad company whose shares have floundered since the government began probing its privacy policies, is inching toward an agreement on privacy standards with the

Federal Trade Commission

.

DoubleClick and other online marketers are awaiting the FTC's reaction to a proposal concerning what type of information they should be able to gather about Internet users, what permission they need to collect that data, and what they can do with the information once they have it. Although there's no guarantee that the companies and the government can come to an agreement, it's possible they'll have a better idea by the end of the month.

A deal would likely boost DoubleClick's beleaguered shares, which have slid steadily since the FTC opened the inquiry into the company's privacy policies in February. At Thursday's closing price of 57 1/4, DoubleClick was some 57% off its 52-week high of 135 1/4. Although the entire Internet advertising sector has been knocked flat of late, DoubleClick's close association with the privacy worries could mean a rebound for the stock once the uncertainty over the issue clears up.

Truth or Consequences

DoubleClick, following its acquisition last year of direct-marketing-firm

Abacus Direct

, hopes to build a database that combines the identities of individual consumers with information about their online surfing habits -- the better to target them with online ads. DoubleClick said in early March that it wouldn't proceed on that effort until the industry could come to terms with the government over privacy standards.

DoubleClick and the other companies making a proposal to the FTC, including rivals

Engage Technologies

(ENGA)

and

24/7 Media

(TFSM)

, aren't talking about what's in their proposal.

But activist Jason Catlett, president of privacy consulting firm

Junkbusters

, says he presumes that advertisers will have to get explicit permission from consumers -- or get them to "opt in," using industry terminology -- before they can gather personally identifiable information about them. When marketers gather information about surfers while preserving their anonymity, Catlett says, it will likely suffice that they give surfers the chance to pull their profiles from the database, or "opt out."

"They may put in a lot of escape hatches around those two branches," Catlett says.

Industry Group

The vehicle DoubleClick and others are using to advance their case is an industry organization called the

Network Advertising Initiative

. NAI has been developing a framework for self-regulation that would reassure legislators that the industry can regulate itself without new legislation aimed at the online advertising industry. NAI members include DoubleClick competitors, but it's been DoubleClick that has been the lightning rod in recent months for privacy concerns.

In recent weeks, the NAI submitted a self-regulatory proposal to the FTC and the

Commerce Department

, according to Mike Griffiths, the chief technical officer of

Excite@Home

(ATHM) - Get Report

subsidiary

MatchLogic

, another NAI member. Both the FTC and Commerce have commented on the proposal, says Griffiths; the NAI is in the process of responding to those comments, he says.

Megan Hurley, associate general counsel for 24/7 Media and the firm's representative to the NAI, says the NAI's proposal covers the notice that marketers have to give consumers -- and the choices consumers are given about data collection -- for both personally identifiable information and non-personally identifiable information. "It's safe to say anything personal or sensitive is opt-in," she says.

Furthermore, confirms Hurley, the proposal covers enforcement issues -- what consequences a company might suffer if it didn't adhere to agreed-upon guidelines.

As Congress continues to take a close look at privacy issues -- for example, the

Congressional Privacy Caucus

held a briefing on Internet issues on Thursday -- Hurley says she thinks the FTC will make a formal response to the proposal by the end of the month.

'Tremendous Drag'

If DoubleClick is able to come to terms with the government over privacy issues, "it would be viewed as a tremendous positive on the stock," says David Doft, marketing and e-marketing services analyst with

ING Barings

. "It's been a tremendous drag on the stock, I think, and the whole sector." Doft, whose firm hasn't done underwriting for DoubleClick, has a strong-buy rating on the stock.

Shares of DoubleClick have lost nearly half of their value since February, when these growing concerns about Internet privacy -- and how privacy issues might hamper the company's attempts to target advertising at Internet users --

knocked the company's stock down. Despite a subsequent recovery, DoubleClick's shares have fallen further, as tech stocks pulled back from their early March peak and investors worried that advertising budgets from dot-com advertisers were drying up.

Josh Isay, DoubleClick's director of public policy, says he's hopeful the sides can reach an agreement. "We hope to get this done as quickly as we all possibly can," he says.