President Kevin Ryan spoke last week with Advertising Age Reporter Jennifer Gilbert, offering DoubleClick's point of view the day before the company announced it was suspending one controversial part of its plan (see cover).
Advertising Age: DoubleClick has a problem. But is the problem DoubleClick's data collection or a bungled handling of the privacy controversy?
Mr. Ryan: I don't think that what DoubleClick is doing is much different than other companies, but clearly, we are going to be the focal point for any kind of conversation because we're the largest and most successful company in our space. We have not done as good a job communicating as we could have on this, but I think that over time the substance will come out. And, despite all the articles, I feel very comfortable that consumers' personal information at DoubleClick is being absolutely safeguarded.
AA: To what extent will DoubleClick have to change its business practices as a result of this controversy?
Mr. Ryan: The Internet changes dramatically, so I always assume that business practices will evolve over time. We've created a lot of the innovations in ad serving and ad delivery, and we continue to spend a tremendous amount of time and focus on developing new products. So there will be all kinds of new products and new variations.
We will continue to strike a balance between the consumers, the advertisers and the publishers. Each constituency has its needs, desires and restrictions. Right now, most advertising-supported companies are not profitable. What the industry will have to decide is [one of] three alternatives: Either many of these businesses will go out of business, or consumers will have to pay subscription fees, or advertising has to grow substantially. We think what consumers actually want is for the advertising component to pay for more and more services on the Internet. The form of how those are delivered will change and evolve.
AA: What does DoubleClick expect the final verdict on privacy will be from the Federal Trade Commission and Congress?
Mr. Ryan: It depends how long out [the verdict comes]. This year, self-regulation will be what the FTC probably recommends, and it'll continue to monitor how the industry is reacting. What people forget right now is that when the FTC did its initial round [of investigating] two years ago, they found that most sites didn't have privacy policies. It's dramatically better now that people have privacy policies, and what [the FTC is] doing is making sure people are living up to those privacy policies. If it turns out that people continually are not [living up to those policies], I think they'll recommend legislation. Right now for this year on most Internet issues, I don't anticipate that there will be legislation. But legislation could [come] if the industry does not do a good enough job, [and] legislation actually could be beneficial for the leading players.
AA: Where has the online advertising industry fallen down on consumer privacy?
Mr. Ryan: There are very few examples of an individual consumer who has had personal information that was contractually committed to be kept secure and was not kept secure. In general, the online industry has done a good job of ensuring online privacy. What is controversial right now regarding DoubleClick is a potential product that we've never introduced.
Most people don't realize this, but what we're discussing is a product that is in development that we'd like to introduce but have not introduced yet. This is the linking of online and offline information. That's not something that we've actually completed or sold as a product. So all the controversy's about potential products. It's actually healthy that the conversation is occurring. Actually, what's been misleading, based on articles in the press, is that people are convinced that these products are out there without public scrutiny when, in fact, just the opposite is occurring. We've introduced the concept before introducing the product.
AA: Where has DoubleClick fallen down on consumer privacy?
Mr. Ryan: I'm not aware of any example of where DoubleClick has had information from any consumer and not respected that information and lived up to our commitment to that consumer or to that Web site. [In] all the articles and all the scrutiny, which is helpful, to date there are no examples being cited [in which] Joe Smith's information was used [in a way that violates DoubleClick's policies relating to use of data]. We've spent a tremendous amount on data security, and it has paid off.
AA: How is what DoubleClick is doing in planning to merge online and offline data similar to or different from what the offline direct marketing industry has been doing for years?
Mr. Ryan: It's exactly the same thing. Except that we are offering better privacy protection. In the offline world, when you subscribe to a magazine or buy a sweater, you don't have the ability to easily opt out. We are offering that. By every single measure, the online world is offering better protection. Right now, people tend to look at online and offline as somehow very different.
Within five years, the concept of online and offline will disappear. [Online] just becomes a delivery mechanism [with which] to order. So it could be a [toll-free] number, a fax, an e-mail, over my cell phone. . . . The point is I'm doing business with [a marketer].
AA: Assuming this targeting of messages is what advertisers want, why aren't DoubleClick's advertiser clients publicly coming to DoubleClick's defense?
Mr. Ryan: The advertisers have been, for us, enormously supportive. The reason I say that is from our business point of view, we announced the [plan to buy offline direct-marketing company Abacus] last June, and in our September quarter and December quarter, business was phenomenal. So they've been enormously supportive.
Mr. Ryan: Well, we have not gone out to them and asked for individual endorsements. We have 4,400 advertisers. What I can tell you is that they are essentially endorsing us by doing a tremendous amount of business with us.
AA: What companies are you referring to?
Mr. Ryan: We have almost every advertiser [on] the Internet. So we have more advertisers than anyone. I'm not sure who to name, but anyone you can come up with is an advertiser of ours.
AA: So you are saying that across the board, they've been supportive, not necessarily publicly, but in terms of their business with DoubleClick?
Mr. Ryan: We've never asked advertisers to publicly support any products we have.
AA: Why not?
Mr. Ryan: That's not something advertisers normally do -- go out there and say, "We endorse products that haven't been launched yet." What is most important to us is that customers buy our products. That's really the form of endorsement that's most important. But that's something that we will contemplate -- getting more public support. Think of all the products we've had in the past. We've never gone out and asked advertisers to publicly say, "This is a good thing."
AA: But given the controversy right now surrounding this issue, why aren't more advertisers coming to the fore in support of DoubleClick?
Mr. Ryan: It's hard because it's not a product that's been launched yet. So it's hard for them to know. We developed [our products] after speaking to advertisers. That's the only reason. That's why we've been very successful and that's why we are, by far, the largest company in this space.
AA: Why does DoubleClick refuse to identify all the Web sites providing it with online data to merge with offline data?
Mr. Ryan: We are a vendor to other companies. The client is the one that has the ability to identify what they are doing. What our clients are doing is what they've always done in offline [direct marketing]. They don't reveal [their relationships]. So the question is, why would they start here? When catalogers have found a source of revenue that is very successful for them, why would they reveal that to their competitors? What we've said is that any participant is obviously completely able to and encouraged to say anything they want, but it's up to them. But they've been members of the Abacus Alliance (a collection of catalog shopper data) for 10 years, and like all data cooperatives, those relationships are generally kept private. It's not up to us. We don't have the ability to do it.
AA: It sounds as though the privacy of the companies might be put ahead of privacy of consumers.
Mr. Ryan: Why would companies that, for whatever reason, in the past have never revealed anything, right now reveal this?
AA: But DoubleClick is not a consumer brand.
Mr. Ryan: Here's the question, really: If you as a magazine were to share information with a third party, does the third party have the right to reveal the data that you've collected? Isn't it up to you to decide whether that third party should share that information? And if they did [so] without your permission, how would you feel? I understand the question, but it's putting us in a position. . . . No one in the industry ever allows [data suppliers] Acxiom [Corp.] or Experian or anyone else to share this information. Is what we are doing consistent with what every other direct marketing company does? The answer is yes.
AA: How well do consumers understand online data collection?
Mr. Ryan: I don't think consumers understand the details of any data collection. What consumers know over time is that they go with companies with trusted brand names that will safeguard their data, and the companies that deal with us absolutely are concerned about safeguarding data.
AA: But how well do consumers understand, specifically, online data-collection?
Mr. Ryan: It's a new industry, so I think they are learning. There have obviously been a million articles; but it's also quite complicated, so I don't think they understand every aspect of it. But consumers don't understand every aspect of what happens to data in the offline world, either. What is important is if they want to know about it . . . there [should be] information available. I've never seen any online or offline player provide more information [than DoubleClick]. I would challenge anyone to come up with an example of someone who's provided more information than we have.
AA: Does DoubleClick have any interest in buying either a permission-based e-mail marketing company or an online incentives program, and would such opt-in programs help allay consumers' online privacy fears?
Mr. Ryan: All of our e-mail is opt in. We have an e-mail business and it is 100% opt in. The company we acquired is called Opt-In E-mail. E-mail has to be opt in. The standard in direct marketing across the board is opt out. It's generally not done as well offline as it's done online. Online, there's a much easier opt out. But [regarding a possible acquisition], we always look at a variety of things to see if they fit into our business model or we look into developing new products, so it's a possibility.
Mr. Ryan: Absolutely. But that's true of any company out there.
AA: A case can be made that consumers will be most comfortable dealing with sites that don't share data, namely, sites like Yahoo! that serve their own ads. Perhaps marketers will see safety in steering to such sites that don't rely on third-party ad servers. What does this say about the long-term viability of DoubleClick's business model?
Mr. Ryan: It's not a question of us; it's a question of how do small Web sites sell advertising. The revenues of the ad networks, [including] ourselves, 24/7 [Media] and [CMGI's] Flycast [Communications], have grown faster than the single sites and faster than the search engines over the last year and a half. If you look at the data, your point is, so far, completely wrong. Because the traffic growth and the advertising growth of the ad networks every single quarter over the last year and a half have been faster and higher than the search engines.
AA: And you think that will stay that way?
Mr. Ryan: The reality is the majority of traffic on the Internet is becoming more distributed, so there are more and more sites out there, single sites; and so what you are seeing is that what is proving to be a very effective business model is the ad networks.
AA: But assuming consumers feel more comfortable ultimately dealing with branded sites that don't use third-party ad-servers . . .
Mr. Ryan: I don't assume that. I think the ad networks are doing a very good job in safeguarding privacy.