The hot-button issue is in the spotlight again as one firm says it has gathered 30 million profiles to better target advertising.
Engage, which earlier this year bought ad server software firm Accipiter, does not collect names or postal or email addresses--but even its anonymous collection of data raises privacy concerns.
"For many consumers, their privacy concerns are not just about the collection of data, but about the fact that they're being watched," said Deidre Mulligan, staff counsel of the Center for Democracy and Technology, an Internet-focused civil liberties group.
But Mulligan credits Engage with trying to address privacy concerns by stripping out identity, suggesting that some consumers may "take solace" in the fact that advertisers and Web sites don't know who they are. But she worries that data from Engage's profile could be used by law enforcement to track down a specific person.
"You can recreate a profile that is identifiable," Mulligan added.
So far, Engage, owned by CMG Information, is doing nothing with the profiles, but that should end soon. Anonymous profiles can be used to target ads--initially for customers that use Accipiter's software--or to personalize content.
The dilemma between offering popular personalization features, which require some knowledge about an individual's interests, and protecting privacy is compounded by the fact that most Internet content is free to consumers, paid for by advertisers on many sites. Personalization and ad targeting benefit advertisers and Web publishers, who gain from knowing more about individual users.
The Engage Knowledge database was created by putting a "cookie" on the Web browser of a visitor to participating sites, then saving data on what that user looked at on the various sites.
The 30 million user profiles come almost exclusively from Web sites affiliated with CMG, including portal site Lycos, its community subsidiary Tripod, and AdSmart, an online advertising network with about 60 Web site customers.
Engage began collecting the profiles in March and had previously announced it reached 12 million profiles.
"Engage does a good job of separating any real personal identifying name or address from this data, so it's totally anonymous and there's not much to be afraid of," said Jim Nail, senior analyst at Forrester Research.
Engage Knowledge is not the only ad-oriented firm collecting such personalized data, although Jane Foreman, director of corporate marketing for Engage, said her firm's capabilities are the most advanced because they classify individual Web pages into 850 different categories.
DoubleClick, which has both ad server technology and an ad network that sells ads as a service, has similar targeting based on the content of the sites it represents.
AdForce, an outsourcing ad service previously called Imgis, has similar capabilities--plus a deal with MetroMail, which collects vast amounts of individualized data used in direct mail in the physical world.
That linkage raises stronger privacy concerns--MetroMail and other database firms collect have names, addresses, and a vast amount of other data, which could be tied to visitors at Web sites. However, MetroMail already has that data on millions of individuals, and privacy has generally not been widely debated or addressed.
"In theory, instead of getting ads for stuff you have absolutely no interest in, a golfer would get information about golf equipment," said Forrester's Nail. "One of the things Engage is doing is not just targeting ads but delivering targeted content as well. With that profile information, a content site can be much more focused in giving editorial that is of interest to you."
Engage's announcement today follows a report last week from Jupiter Communications, saying that ad targeting is highly important to ad-supported Web sites.
"[Internet ad prices] will fall in unless targeting steps up," said Evan Neufeld, who runs Jupiter's online advertising practice. "A year ago, click-through rates [the percentage of viewers who click on an ad banner] were around 2 percent. Today it's about 1 percent. We would posit that if targeting was doing better, we would have higher click-through rates."
Added Forrester's Nail: "For Web sites, the dream is to be able to charge more for the more targeted the advertising is." Today's glut of ad banners is keeping prices down, he added, and advertisers are relatively happy targeting ads based on a site's editorial content.
But Neufeld thinks Web publishers who rely on ad revenue to run their sites must do a better job communicating to users on privacy issues.
"User privacy is a huge thing, and Internet marketers need to be in front of it more than they have been," he said, although he downplayed the level of concern about anonymous "clickstream" data collected on how users move around the Web and through a Web site.
Online privacy concerns will be compounded when Web sites begin to link personal data from site registration or online purchasers to the anonymous data such as what Engage is collecting.
"Clickstream data not affiliated with user information [names, addresses, and the like] is not really the user's data, but registration data is definitely the user's data," Neufeld contended. "When you tie them together, then the consumer has a legitimate concern."