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DoubleClick Takes Bath, Throws in Towel

Written By: D. Geller
Published On: March 20 2000

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Event Summary

In an attempt to stem the flood of criticism that has been leveled at his company since its acquisition of Abacus Direct, CEO Kevin O'Connor announced that DoubleClick (NASDAQ:DCLK) had "made a mistake by planning to merge names with anonymous user activity in the absence of government and industry privacy standards."

The statement came after partners AltaVista and Kozmo.com announced that they were shocked, yes shocked, at the possible violations of user privacy resulting from DoubleClick's plans. DoubleClick's stock price has dipped from $135 at the start of the year to $79 after the announcement by the two web sites.

Abacus Direct is a direct marketing company that collects information from catalog companies. DoubleClick planned to merge information from that source with the anonymous surfing behavior that the company collects by dropping cookies on the machines of users when ads are served to them. This would provide much more information that the company could use to target ads to individuals.

DoubleClick's plan to merge the two data streams, once announced in its privacy statement, drew the ire of consumer groups, caused one California woman to file a class action lawsuit, and launched a Federal Trade Commission investigation of the uses of consumer information collected over the Internet. Also it is possible that the popular search engine HOTBOT was hacked to protest the DoubleClick action. For at least two days a search for DoubleClick brought up as the first entry the DoubleClick home page with a tag line identifying it as "The (in)famous DoubleClick Company." DoubleClick did not answer TEC's queries about this strangely deprecating text.

Market Impact

DoubleClick has not abandoned its plans, as Mr. O'Connor's statement made clear. In fact, as revealed by CNET, the company hired a political strategist, Josh Isay, as Director of Public Policy and Government Affairs to manage its lobbying efforts. With advertisers demanding more return on their dollars, DoubleClick will not give up on this issue without a fight.

However, the outcry may well cause the FTC investigators to develop a creative and workable proposal that allows tracking while giving consumers meaningful and workable ways to opt out. Such a proposal has not yet surfaced. (Here's one offered by TEC, gratis: any ad that might have a connection to personal identification could have an identifying mark, such as a red spyglass, in one corner. As rich media technology becomes more prevalent in ads, this mark could actually be made clickable, to take users to an opt-out page.)

It will be interesting to see how DoubleClick's main rival, Engage (NASDAQ: ENGA), reacts to these investigations. Although Engage has been at pains to point out that their targeting methods do not involve the use of personal information, the company must have concerns that a higher level of targeting may be necessary in the future to meet advertisers' requirements.

We certainly won't suggest that AltaVista's high profile announcement had anything to do with the fact that AltaVista is now owned by CMGI (NASDAQ: CMGI), the power behind Engage. If AltaVista was seeing signs of an impact on its own business as a result of this imbroglio, that would be news. Even though the story reached the mainstream press, most consumers have little idea which agency serves the ads that get on the web pages they see.

User Recommendations

Individuals who are worried about these issues have many roads to follow, including refusing cookies and visiting the DoubleClick site to opt out of the (temporarily suspended) data collection program. This was not made as easy as it might have been, and while it is now unnecessary a visit to those pages will register a vote of sorts.

Another way to register a vote on either side is to communicate with your Congressional Delegation.

For firms involved in advertising, our advice remains to be responsible corporate Internet citizens by posting a clear and prominent privacy policy, and by making sure that you know exactly what information is being collected from your website visitors and exactly how it is being used.

 

 
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