E-Commerce Report: Critics Press Legal Assault on Tracking of Web Users

February 7, 2000

By BOB TEDESCHI

Critics Press Legal Assault on Tracking of Web Users

oubleClick, a company that tracks consumers as they make their way around the Web, has never been popular with privacy advocates. In recent weeks, though, mere tension has grown into all-out war with the announcement that the company has begun adding information about consumers' offline behavior to its vast database.
One advocacy group, the Electronic Privacy Information Center, said last week that it was preparing a complaint to the Federal Trade Commission about DoubleClick's tracking practices. Another, the Center for Democracy and Technology, announced a campaign to persuade consumers to opt out of DoubleClick's tracking system.

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Even industry analysts have criticized the company, saying consumers should be able to block DoubleClick's system more easily.
DoubleClick has grown rapidly into an Internet advertising powerhouse over the last few years with two business strategies. First, it licenses to 11,000 clients software that places advertisements on Web pages.
But its far more controversial business is a service it provides to its advertising network, the 1,500 companies that receive their advertisements directly from DoubleClick: monitoring the behavior of individual consumers as they move around the Internet sites that Doubleclick is affiliated with. The information it gathers is aggregated in a huge database, which enables the company to personalize the ads people see when they visit its network's Web sites -- ads that play directly to an individual consumer's interests and buying habits.
Advertisers love the advantages this gives them in focusing on precisely the right buyers. Privacy advocates, though, have never been comfortable with the fact that few consumers realize they are being monitored, and that when they do realize it, they often find it difficult to opt out -- that is, to instruct DoubleClick not to track their online activities.
Privacy concerns are increasing because DoubleClick's new Abacus Alliance service, created after DoubleClick bought the database company Abacus Direct last year, has begun combining its online data with information gleaned from consumers' offline purchases from major retailers, catalog companies and publishers.
For instance, an alliance member who sells printer cartridges could get a list of 1,000 people who have bought computer printers from retail stores in the last six months. When those people are surfing other alliance sites in search of information on replacement cartridges, DoubleClick could show them an ad for one that matches their computer.
Not all 1,500 members of the DoubleClick network will get the extra data, however, only those that join the Abacus Alliance.
DoubleClick argues that such behavioral monitoring helps consumers, and the company stresses that Internet users will be notified of the tracking and given the opportunity to opt out of the program.
DoubleClick also pledges that the alliance will not collect information on medical, financial or sexual behavior, or on children's surfing habits.
Such statements have done little to mollify privacy groups, however. For one thing, the company is under no legal obligation to live by those restrictions and is free to change its policy unilaterally.
If the criticisms of privacy advocates fail to generate much alarm among the majority of Internet users, the company says, it might be because they view such advertising methods as a service. On the other hand, privacy advocates say, it could simply be that few consumers know what DoubleClick is, much less what it does.
Analysts say most Internet users are not aware that Web-site publishers often do not have full control over the ads they display because they rely on third parties to place those ads -- and to determine which consumers see which ads. The portal AltaVista, for example, uses such an approach to avoid the cost of developing and maintaining in-house computer systems for placing ads.
Though advertising networks like DoubleClick collect fees for placing ads on their clients' Web pages, they stand to benefit even more, perhaps, from the data they collect.
When a computer user views an ad on a DoubleClick network site for the first time, DoubleClick assigns an identifying number to the user's hard drive in a file known as a cookie. Each subsequent time that computer shows up on another DoubleClick network Web site, the network recognizes the visitor and notes his activities, including what type of content he is viewing.
So, for example, if one or more users at the same computer visit a particular car maker's pages on automobile Web sites affiliated with DoubleClick, DoubleClick can recognize that computer when a user shows up on any of its 1,500 affiliated sites and display the ad of the automaker -- or an ad for another car maker who has paid DoubleClick (handsomely in most cases).
"A majority of consumers want targeted ads," said Jonathan Shapiro, DoubleClick's senior vice president. While acknowledging that 50,000 people had opted out of DoubleClick's tracking system in the last four years, most do not, he said, because the ads they end up receiving are "much more relevant" to their interests and needs.

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Analysts said the tracking phenomenon was gaining momentum, as advertisers demand greater results for their ad dollars. It is natural, they said, to try to improve the potency of the tracking systems by integrating data from online and offline sources.
Not all advertising networks agree, though. Some, in fact, are looking to gain market share as privacy concerns grow. Real Media, for example, is building a business model on technologies that attempt to protect consumer privacy.
"One of the expectations of our business was that consumer information would become very valuable," said Dave Morgan, Real Media's chairman and founder. "We expected that consumers would not be comfortable trusting their private information to parties with whom they have no relationship. But they would entrust that information to a limited number of sites they'd built a relationship with."
As a result, he said, Real Media's software enables a site to track a visitor's movements and to use that information to place ads that are better targeted. But it also allows Web sites to prevent the sharing of that information with other advertisers, marketers and Web sites.
(Real Media licenses its ad-serving technology to Times Company Digital, which publishes The New York Times on the Web. Times Company Digital also accepts advertisements delivered by any of the companies that license ad placement software, including DoubleClick. It is not part of those networks, however, and Times Company Digital says it does not share data about individual users' behavior.)
Morgan said he expected this approach would give Real Media a competitive advantage in markets outside the United States, especially in Europe, where users and governments are more vigilant about privacy. "And ultimately, we think it'll give us an advantage in the U.S., as well," he said, given what he called "the privacy backlash."
Daniel MacKeigan, an analyst with the investment firm Friedman Billings Ramsay, said that neither Real Media nor DoubleClick had necessarily struck the perfect balance. "There's definitely a changing tide when it comes to privacy," he said. "But advertisers like data, and by not using it, Real Media's missing a large opportunity."
But MacKeigan also said that if the vast majority of consumers are to accept the DoubleClick model, the company "will have to give them a viable economic reason to be tracked."
"For instance," he said, "give me a discount on something I'd been checking out, and do it in a subtle way."
And, he added, "DoubleClick has to give consumers a better way to opt out."
Some in the industry want ad networks to adopt an "opt-in" model, whereby people must request to be included in the program before they can be tracked, while others prefer the idea of a single Web site that users could visit to opt out of all such programs.
As the industry debates, however, the prospects for government regulation -- and consumer enmity -- grow.
"The question is, how far can you take this?" MacKeigan said. "Is this a new medium that has less of a tolerance for tracking? A privacy cloud looms on the horizon, and DoubleClick has to heed the warnings."
The E-COMMERCE REPORT is published weekly, on Mondays. Click here for a list of links to other columns in the series.

Related Sites
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DoubleClick
DoubleClick: Privacy & Opt-Out Page
Electronic Privacy Information Center
Federal Trade Commission
Center for Democracy and Technology
AltaVista
Real Media

Bob Tedeschi at tedeschi@nytimes.com welcomes your comments and suggestions.

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