New Online Privacy Group Faces Fatal Flaw

A group of 26 Internet advertising companies announced the formation of an organization to tackle the issue of online privacy at the Internet World trade show in Los Angeles today.

Perhaps the most notorious member of this new “Personalization Consortium” is DoubleClick, whose data collection practices have triggered a U.S. Federal Trade Commission (FTC) inquiry and legal action by several states.

The new group says that it intends to adopt a stringent set of privacy guidelines for Web sites that collect data from consumers, and expects to differ from other privacy groups by requiring its member sites to display a special seal and strictly adhere to its guidelines.

Some Companies Already Opt Out

While such an effort is long overdue — considering the proliferation of class action lawsuits over alleged breaches of online privacy — co-chairman Bonnie J. Lowell made it clear that several Internet companies are unwilling to let consumers know what kind of information is being collected about them.

“If you don’t want to comply, don’t join,” Lowell flatly told the New York Times.

Lowell is hardly a newcomer to the online privacy debate, being the founder and chief technology officer of New York-based Younology, a software company that manufactures programs that enable consumers to monitor how they are being tracked online. In fact, some observers believe that Lowell’s involvement in the new privacy organization will only serve to boost its credibility.

Tough Requirements

Meanwhile, allowing consumers to see what data is being collected on them is not the only requirement for becoming a member of the new organization. Members must also agree to an annual privacy audit, as well as to an “opt-out” feature for those Web surfers who wish to remain anonymous.

The ability to opt-out directly addresses the persistent complaints by privacy advocates that DoubleClick and other sites have made opting out of being tracked online far too complicated a task for the average consumer.

Fatal Flaw

Other members of the new group include American Airlines, BroadVisionKPMG and 1:1 Marketing. However, the absence of Yahoo! — which just last week confirmed that it is cooperating with the FTC in its investigation of information gathering on the Web — is a stark blow to the consortium’s efforts.

In fact, such an absence could be the fatal flaw in the group’s effort to ward off government intervention through strong self-regulation.

Low Membership

It is discouraging to me that only 26 companies have joined this effort, especially when one considers that DoubleClick’s current situation all but forced the company to embrace the group. In my mind, the vast majority of online merchants still feel that privacy issues are something that must be faced only when the government grabs them by the throat.

So, while I certainly believe that the Personalization Consortium should be supported, it is hard to imagine that this well-intended effort has the muscle needed to effectively steer the debate and the industry into productive waters.