DoubleClick Attempts To Save Face After Privacy Debacle

Stung by industry-wide criticism over revelations that it compiled and sold user information without proper disclosures, Internet advertising giant DoubleClick, Inc. (Nasdaq: DCLK) launched a public relations counterattack Monday with what it claims is “one of the largest public service campaigns in Web history.”

At the heart of the matter is DoubleClick’s recent $1.7 billion (US$) acquisition of Abacus Direct Corp., a direct-marketing services company that maintains an extensive database to catalog the purchasing power of American households. Internet privacy advocates objected to the acquisition at the time, saying that it would create the opportunity for the exploitation of online users.

DoubleClick maintains that it gathers information solely to provide advertising targeted to Net users’ tastes and allows an “opt-out” feature allowing users to disconnect the company’s cookies.

However, privacy advocates insist that this opt-out feature is hidden from view, and maintain that DoubleClick uses its relationships with prominent Internet companies to track millions of consumers’ spending habits and then ties that data to Abacus’ offline activities without proper disclosures.

DoubleClick has also become the subject of a class action lawsuit and numerous complaints to the Federal Trade Commission (FTC). While the FTC has said nothing specifically about DoubleClick, FTC Chairman Robert Pitofsky mentioned in a recent speech that the agency is concerned about “the merging of online and offline databases” in relationship to consumer privacy.

Public Relations Spin

DoubleClick is attempting to rebound from its public relations disaster by sponsoring more than 50 million banner ads that will link to its site for the Privacy Education Campaign. Additionally, the company will take out full-page advertisements in the New York Times and other newspapers to inform consumers of its five-point privacy initiative.

“We are asking every Internet user to go to Privacychoices.org to learn about privacy and make an informed choice about whether to receive the benefits of personalized ads,” said company President Kevin Ryan.

DoubleClick has also hired a major accounting firm to conduct audits on its privacy campaign. It is establishing an impartial consumer privacy advisory board which will include consumer advocates, and is hiring a new chief privacy officer (CPO) to report directly to the company’s board of directors.

DoubleClick Versus the Consumer

Many observers believe that “third-party” ad banner delivery companies like DoubleClick are among the most egregious of privacy offenders, because they seem to prefer corporate marketing interests over the interests of online consumers. Internet ad banner serving — while ubiquitous — is still largely unregulated and devoid of standards, resulting in a lack of consumer protection.

DoubleClick operates in a fiercely competitive industry, with competitors like 24/7 and others involved in a wave of corporate buyouts and consolidation. Ultimately, these efforts by DoubleClick to harvest user information could quite possibly be a desperate and ill-advised policy aimed at differentiating their services from those of their competitors.

Earlier this month, the Center for Democracy and Technology launched an e-mail campaign encouraging Net users to e-mail complaints to DoubleClick and to 60 of DoubleClick’s most prominent clients, including AltaVista, Drkoop.com and Ask Jeeves.

DoubleClick is the largest advertising company on the Internet, claiming to handle advertising for 12,000 Web sites. The company says that it delivered nearly 30 billion advertisements to targeted Internet users in December 1999.

Market Remains Bullish

While DoubleClick has certainly taken it on the chin recently from its critics, Wall Street has remained fundamentally bullish. While DoubleClick’s stock has drifted downward to close at $108.44 from a high of $135.25 on January 3, 2000, it has risen from a low of $18.09 one year ago.

The company, which already has $68 million in the bank, recently filed to sell 5.9 million shares at about $93 million per share. Inside investors also filed to sell an additional 1.6 million shares.

DoubleClick reported net revenues of $258.3 million and a net loss of $55.8 million for the year ending December 31, 1999.

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