Special Report: Privacy concerns grow

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If e-commerce's boom in 1999 greatly helped marketers, publicity about related privacy issues raised major concerns. Consumer groups, legislators and regulators paid little attention to the kind of profiles marketers were gathering without permission, using traditional direct mail lists to solicit business by mail and phone. They reacted far more strongly when the same information was gathered by Web sites. Further sparking concerns were worries that marketers could get far more detailed personal information, seeing what consumers viewed and not just where they bought; that tracking was taking place secretly; and that companies planned to combine traditional databases with online profiles. Worried that the practices threatened consumers' confidence in Internet commerce, various industry associations rushed to implement self-regulatory plans and industry seal programs. Some companies, such as IBM Corp., required sites on which they advertise to have privacy plans in place. Consumer groups and some regulators, however, remained skeptical, raising questions about not only marketers' data, but information obtained by third-party ad servers. Several consumer groups pushed the Federal Trade Commission to block a deal in which DoubleClick, an ad-serving company with online profiles, sought to buy Abacus Direct, a company with offline profiles. But the purchase was completed in November.


Free Internet access is not a new idea, but it did take root in 1999. A handful of companies, including NetZero and 1stUp.com Corp., began to amass enough subscribers to give the ad-supported model a chance to work. NetZero, which launched in October 1998, had about 2 million subscribers by the end of September. Similarly, 1stUp.com, a start-up that allows advertisers and sites to brand an Internet service provider business, hit 1 million subscribers through co-branded deals with sites such as AltaVista and Gay.com. CMGI added 1stUp to its growing roster in 1999. The free PC model had a harder time. Free-PC, an Idealab Capital Partners company that offered ad-supported PCs and Internet service, sold out to eMachines, which sells low-cost computers. Consultancy Jupiter Communications said that while the free PC market is "a losing battle,'' ad-supported ISP service is "a difficult proposition, but one in which the economics can work.'' Jupiter predicts 13% of all online users will access the Web via a free Internet service by 2003.


The following is a list of Internet companies that didn't go public this year. Hmmm, it's a bit short. But it does seem the entire Internet made its initial public offering of stock this year, with e-tailers, services outfits and interactive agencies striking it rich. How rich? Agency.com commanded a first-day market capitalization of $2.56 billion, netting a big gain for 46.6% owner Omnicom Group. Old-media companies rushed in with the intent to cash in, with Walt Disney Co., the New York Times Co., Tribune Co. and General Electric Co.'s NBC among those planning or creating Net stocks. CBS Corp. and News Corp. traded ad time for stock in dot-coms, hoping for big payoffs down the road. Better get used to seeing a lot of ads, promotion and content on Fox for early '99 IPO Healtheon/WebMD: News Corp.'s $1 billion deal for a 10.8% stake in the health site is set to run 10 years.

Copyright December 1999, Crain Communications Inc.

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