Google, DoubleClick Address Privacy Issues

With the FTC announcing today that hearings on behavioral advertising will take place in Washington D.C. on November 1st and 2nd, I thought it may be a good opportunity to revisit the Google DoubleClick deal that shook the online advertising world and had people up in arms a few months ago.

Why would regulators and privacy advocates be so concerned with this acquisition? First, a little background is in order. Google (GOOG) has dominated search marketing with their AdWords and AdSense program for years, and is what has made Google so profitable as well, accounting for 99% of their revenue as a total.

Since AdWords inception, Google has been able to track what users were clicking on and reporting this information back to paying advertisers to enhance their search campaigns.

In addition to tracking paid search results, for almost two years Google has been tracking what users search for in their "organic" or natural search results in order to establish a profile of their users.

While this has been going on, the world of traditional internet advertising (via Banners and such) have been growing at an astronomical rate, from $12.5B in 2005 to an estimated $23.8B in 2009.

The growth in this sector has led to a large numbers of mergers and acquisitions, including Google's $3.1B acquisition of DoubleClick.

What does DoubleClick bring the table that Google doesn't have? For starters, DoubleClick's advertising platform DART serves over 60 Billion ads per month and reaches over 80% of the US internet population.

These advertisements appear on thousands of different Websites. As internet users move across the Web from site to site, DoubleClick builds up demographics information and browsing history to create a profile of their users. This is possible because although users are accessing different sites across the internet, DoubleClick's servers are being referenced by every single Website, and your history is updated.

If you integrated DoubleClick's browsing patterns with Google's search history, Google would have access to your entire web experience at it's fingertips, including what you searched for, what sites you've visited, and what products you've purchased.

Google would then use this information to serve extremely targeted advertisements to users either in forms of traditional banner-like internet advertising or Google's sponsored search results and even alter Google's organic search results via Google Personalized Results.

So, what's the problem? Advertisers win because only the most highly targeted advertisements are displayed to customers. Users win because they will only see advertisements that cater to them. Google wins because they make more money.

The problem is this: the described relationship between DoubleClick and Google effectively creates an online advertising monopoly. Why would advertisers choose to take their money anywhere elsewhere when it is clear that Google will give them levels of target ability and reach that have only been dreamt about in the advertising industry up until now? Google has said publicly they will not be actively embrace behavioral targeting, however some analysts don't believe that Google can keep it's hands out of a $3.8B dollar piece of online advertising.

In addition to the imposed monopoly, privacy groups are concerned that Google will simply have too much information on individuals; information that Google never really had permission to have in the first place. Google will literally have access to just about every demographic available about an individual. Google has responded by announcing that all search-query data will be eliminated after 18-24 months.

I don't know which way the FTC will go on this issue, but I do know that Google, DoubleClick and the online advertising industry as a whole will be very closely be watching the FTC hearings Nov 1st-2nd.