Industry Leaders Tackle Online Privacy Issue

Faced with mounting pressure from regulators and online privacy advocacy groups, 26 Internet advertising, direct marketing and consulting companies announced today that they have formed a self-regulating organization called the Personalization Consortium.

Based in Wakefield, Massachusetts the organization will serve as an advocacy group for responsible marketing on the Web and will develop privacy standards for its members to follow.

DoubleClick (Nasdaq: DCLK), the Internet advertising and direct marketing company that was the center of an online privacy controversy recently, is among the group’s charter members. DoubleClick aborted its project to sell Web surfers’ personal information linked to their shopping habits amid a firestorm of criticism.

Other notable charter members of the organization are American Airlines (NYSE: AMR), E.piphany (Nasdaq: EPNY), BroadVision(Nasdaq: BVSN), KPMG Consulting and PricewaterhouseCoopers.

Having announced recently that it is cooperating with a government investigation of its information gathering practices, Internet giant Yahoo! is a notable absence.

Responding to Pressure

The group was formed after the Federal Trade Commission (FTC) issued a thinly veiled threat for the industry to start policing itself or have government regulators step in to do so.

The FTC did launch an investigation into the practices of DoubleClick, which came under increasing scrutiny after it bought offline direct marketing company Abacus for $1.7 billion last year.

Privacy advocates feared the acquisition would make consumers vulnerable to tracking of their online habits and personal information for direct marketing purposes. DoubleClick pulled back from its attempts to link the two last month, but the company has not categorically dismissed the practice.

Instead, its has responded with a barrage of public relations efforts and self-regulating measures. It opened an executive position to deal with privacy issues and established an advisory board to report to the company chairman.

Survey Says Privacy Secondary

In today’s announcement, the Personalization Consortium also released the results of a survey it conducted of 4,500 Web users regarding privacy issues.

The group said that only 15 percent of respondents would be “unwilling to provide personal information to Web marketers if that information improved their online experience.” Over 50 percent said they would share personal information in exchange for better service, the group said.

The survey also revealed that 73 percent said they find it “helpful and convenient when a Web site remembers basic information about them” and 62 percent say they dislike Web sites requesting personal information they have already provided.

Only 38 percent of respondents found that privacy statements on Web sites were easy to understand, a statistic that will lead the organization to develop consumer-friendly guidelines, it said.

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