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VIII. Overview:

Overview of Case Analysis Growth of Company A. Acquisitions B. Abacus Alliance Company Financials Need for Chief Privacy Officer Technology Leadership A. Cookies B. DART C. Vision of iTV Multi-Channel Marketing A. Online Marketing B. E-mail Marketing C. Abacus – Direct Mail / Market research Privacy Issue A. Consumers’ complaints / lawsuits B. Doublclick’s reactions Recommendations for a Compromise

DoubleClick is a company that has taken a leadership role in the new digital media world. The company claims that without their products and services the online economy would fail. Leadership often is a result of challenging the status quo, and DoubleClick is no stranger to pushing the envelope when it comes to internet privacy. This company introduced controversial practices which in turn, make the internet a highly effective medium for reaching consumers through target marketing and profiling. DoubleClick’s motto is to “allow marketers to deliver the right message, to the right person, at the right time.” The success of this company can be measured by their ability to follow this motto. However, in this case analysis, we will determine if DoubleClick’s technology and marketing strategy helps or hurts consumers’ ability to use the internet as a medium for commerce and pleasure without giving up rights to privacy and being subject to involuntary consumerism. Many e-business models have failed because they lack the resources needed to effectively reach enough online consumers; DoubleClick offers a service to companies that give them the ability to directly target these once elusive consumers. DoubleClick derives revenue from their ability to record, analyze, and target online advertisements based on user data obtained from cookies. Cookies are a unique tag that DoubleClick’s

servers place on users’ computers. Growth Strategy: The first major push for DoubleClick to become an online marketing leader was to initiate an aggressive acquisition campaign that would build a technology and information arsenal. reporting and analysis of e-mail campaigns. Opt-in lists are generally described as consumers who agreed to have their e-mail address published for solicitation purposes. DoubleClick also has the ability to coordinate entire marketing campaigns by employing data collected from cookies. The use of cookies is discussed in more depth as this case analysis develops. Their next target was the growing sector of e-mail marketing and opt-in list management. a leading software provider for online interactive marketing.com specialized in serving online retailers. FloNetwork maintained an opt-in email address list of 26 million. they were a leader in e-mail marketing which includes the publishing of opt-in e-mail lists. DoubleClick now managed the largest opt-in email list of over 40 million addresses. One way DoubleClick developed such a large pool of technology and information based resources is through acquisitions and partnerships. This strategy also included forming sensible strategic partnerships with companies to big or to costly to acquire. media firms. . Opt-in email. real-time tracking. After the purchase. online and offline consumer databases and utilizing different forms of online media.com was acquired in December of 1999. NetGravity contributed toward DoubleClick's approach of online target marketing and strengthened its lead among all other online marketing companies. FloNetwork also contributed expertise in the areas of list building. DoubleClick purchased this competitor for $530 million in a stock transaction (Cnet news. The controversy here is that many of these individuals do not know exactly what ads or promotions they are agreeing to receive and they also have no control over which companies buy their addresses. and was purchased for an undisclosed price of cash and stock in April of 2001.com). and software and hardware companies. NetGravity produced software that was used to increase advertising response rates by utilizing customer targeting. Opt-in Email. In July 1999. These resources collectively make up the largest source of information any company would need to market to consumers online. Furthermore. The long list of acquisitions starts with NetGravity. maintenance.

Abacus maintains the largest database of consumer. banner ads or even e-mails related to weddings to a targeted group of people with shared interests. Companies trying to market online realized that banner ad click-through rates were relatively low across the board. Offering sweepstakes to develop a database of users. address. DoubleClick saw it as an early step to combine information gathered from users’ online activities and couple it with offline consumer behavior patterns. Basically. This form includes key indicative data files: name. and online transactions which is used for both marketing . publishing. For example. Flashbase is responsible for most of the internet’s online sweepstakes promotions. To diversify their consumer databases. if someone entered an online sweepstakes to win a designer bridal dress. an offline database that operates a cooperative membership group of catalogers and mail order marketers. e-mail address. In a highly controversial move. privacy watchdog groups. These sweepstakes offer prizes to a lucky few but in order to be considered one must fill out the entry form. only to eventually target them with ads. at the right time. Valueclick developed a model of performance based banner ads where advertisers only pay for actual click-throughs. member companies would collaborate and share transactional data of their customers for the purpose of consumer modeling. B2B. potentially phone numbers. DoubleClick also owns a majority 60% equity stake in a company called Flashbase. DoubleClick acquired SmartBase. DoubleClick that it was such a good idea they bought a 30% minority equity interest in Valueclick to at least have exposure to this pricing model in case in became the status quo.7 billion and it drew the attention of Wall Street. consumer rights groups. This was a powerful target mail marketing tool.Another interesting strategy that DoubleClick used to expand its exposure to the online marketing sector was to invest in companies that offered innovative solutions to some of the problems that the sector was facing. It also offers a general description of one’s interests. higher quality consumers. age. This database could be used to effectively deliver pop-ups. and even the Federal Trade Commission. fell right in line with DoubleClick’s motto of delivering the right message. Advertisers like this model of pricing because it was cost effective and they only paid for motivated. to the right person. DoubleClick bought Abacus Direct for $1. Flashbase would take the entrant’s information and create a database of people that were thinking about marriage.

and their hard drive full of cookies. or at any public computer. Joining the online and offline databases will provide the most comprehensive consumer profile that marketers have ever utilized. The range of data includes: geographic. can now potentially be associated with personally identifiable information and past purchases. The default is that one can be tracked and added to a DoubleClick or Abacus database. With the acquisition of Abacus. B2B. DoubleClick has ambitions of using this information to come up with a new marketing strategy labeled as “predictive mail. and behavioral data. The second issue is that online activity looses its anonymity and can be tied to any number of offline behaviors and demographics. as it is now referred. The fear here is that companies will abuse this wealth of information and invade our personal lives in the name of marketing a product. There are several reasons why consumer rights groups and privacy protection groups fear the DoubleClick and Abacus entity. The first issue is user consent to be apart of a tracking and profiling database. Abacus has over 3 billion consumer offline transactions that can be linked to personally identifiable information. Their database consists of more than 3.” The general concept with predictive mail . Abacus operates by allowing companies to utilize its database for modeling purposes if the company agrees to share accurate transactional data from their own business practices.5 billion transactions made by more than 90 million US households. consists of 1200 member companies which all contribute and utilize transactional and demographic information from many oblivious consumers. demographic. once anonymous users. DoubleClick developed a somewhat anonymous database of online surfing trends by placing cookies and tracking 53 billion ads per month. e-commerce. This anonymity made it difficult for marketers to present their products to the right people. One must be proactive in order to opt-out of these databases. This information was collected from catalog. Opposition groups think the logic here is completely backwards and DoubleClick should only be allowed to track those users that opt-in first. and publishing marketers. For example. retail. This greatly improves marketers’ ability to find the right online consumers which subsequently saves time and resources. Surfing the internet was once an anonymous activity performed within the confines of one’s own home. lifestyle. Currently the DoubleClick Abacus Alliance.modeling and direct target marketing purposes.

in part. DoubleClick has been plagued by severe financial issues since 1999. The notes to the consolidated financial statements for these years all report restructuring charges which are be associated with their many acquisitions.is to combine past transactional data and consumer demographics from Abacus. It appears that these losses arose. Taking the privacy issue standpoint. together with online behaviors and very recent signals of a consumer’s intent to purchase which are gathered from DoubleClick’s resources. During this period of uncertainty. All this information can then be compiled to formulate a direct mailing campaign for a product to reach a highly targeted group of consumers. Ultimately. Their annual reports for 2000. and administrative organization o Involved terminating 180 employees o These costs arose from:  Severance Packages . These charges are as follows:  2000 Restructuring Charges o $2. with the bursting of the internet bubble many took the view that internet companies may be considered grossly overvalued. the DoubleClick-Abacus merger is seen as a dangerous marriage of consumer profiling information. the potential for e-commerce was seen as speculative. 1996. development. DoubleClick went through difficult financial events especially issues surrounding acquisitions of companies that turned out to be overvalued themselves. DoubleClick’s financial condition should be prefaced with a brief historical review of the overall economic environment in which DoubleClick grew as a company and as a leader of an emerging market. from their aggressive acquisition policy.4 million charge to operations o Reportedly taken to better align its sales. throughout the late 90’s and early 2000 the sentiment for e-commerce shifted from purely speculative to overly optimistic. However. Following is a detailed description of the financial health of the company both past and present. 2001. DoubleClick Financials: No case analysis would be complete without an examination into the financial health and stresses of a company. and 2002 all report operating losses. When DoubleClick was incorporated on January 23.

6 million in other exit costs  2002 Restructuring Charges o $98. and administrative organization and reduce corporate overhead o These costs included:    $5. which is not an independent entity.7 million for accrued future lease costs $19. DoubleClick changed its estimate of the useful lives of its production equipment and software.4 million in severance payments to 605 terminated employees $51.7 million write-off of fixed assets According to the 2002 Notes to the Consolidated Financial Statements.5 million write-off of fixed assets $2. Due to the fact that depreciation of computer equipment and software occurs . Note 10 in the 2002 Notes to the Consolidated Financial Statements entitled “Property and Equipment” contains a category entitled “Computer Equipment and Purchased Software.2 million charge to operations o Reportedly taken to increase operational and bring costs in line with revenues o These costs included:     $10. development. Although DoubleClick does not define production equipment in this note. effective January 1.   Outplacement Services Continued benefits to terminated personnel 2001 Restructuring Charges o $84. we believe that it is safe to assume that production equipment means computer equipment. 2002.” Given DoubleClick’s industry and these notes.0 million for accrued future lease costs $15. DoubleClick extended the estimated useful life of these assets from three years to four years based on an analysis performed by their operations department.7 million in severance packages to 250 terminated employees $77.4 million charge to operations o Reportedly taken to better align its sales.

and the realization that privacy will play a role in differentiating them from their competitors. It appears that DoubleClick is using questionable accounting practices in order to mitigate their operating loss for the year ended December 31.primarily because of obsolescence and that the analysis on the assets’ useful lives was conducted in-house. the position must be granted the appropriate . A relatively new position. Need for a Chief Privacy Officer: Acting as a leader of an emerging e-commerce sector required a change in the executive structure of DoubleClick. the need to augment consumer and governmental scrutiny. Although the survey found that the functions of the CPO is still evolving and many other characteristics vary from company to company.3 million because of this change. the positioning of the CPOs were as follows:         Legal Department (47%) Engineering (4%) Ethics Office (4%) Government Affairs (6%) Marketing (6%) Senior Management (6%) E-Business (7%) Other (11%) PWC also found that 8% of those companies created a separate and independent Privacy Department headed by the CPO. the Chief Privacy Officer (CPO) has emerged among privacy conscious organizations. The primary reasons that this position has come about is due to new regulatory requirements. PricewaterhouseCoopers (PWC) conducted a survey of 66 organizations that employ CPOs in order to determine the positioning of CPOs. it is difficult to accept DoubleCick’s assertion that the useful lives of these assets should be extended. In addition. DoubleClick points out in the same note that 2002’s net loss was reduced by approximately $8. The first is that in order for the CPO to be successful. 2002. PWC’s survey found that regardless of the placement of the CPO within the organization. there are certain characteristics of the placement that are common.

Thus. Mr. Smith has any legal or IT experience nor does it indicate where the company placed their CPO. The second is that role of the CPO must me incorporated to allow the CPO to effectively coordinate the development. Finally. Bennie Smith serves as DoubleClick's Chief Privacy Officer. there is a going concern on how this information is used by Privacy Groups and individual who understand what is going on. the survey indicated that the primary reasons for this placement are that initiatives under government authority are taken seriously. the vast majority of companies chose to locate the CPO in the Legal Department. and maintenance of the corporate privacy strategy. According to DoubleClick he is responsible for guiding privacy policies and practices across the company's business units and geographies. it appears that the placement of the CPO outside the Legal Department is due too the privacy authority residing in the department with the highest risk of breaching the privacy policy. According to DoubleClick’s Executive Bios website. but they are skirting the fringes of the law when it comes to Internet privacy issues. For the remainder of the companies. It does not indicate whether Mr.A. and the interpretation of laws and regulations require the expertise of legal counsel. a significant amount of interpretation is required to understand the implications of a privacy policy on organizational procedures and potential litigation. Technological Leadership: Multi-Channel Marketing: Privacy Issue in Depth: DoubleClick doesn’t have any issues with the use of technology. Since there aren’t many laws in the United States to protect consumers and how their personal information is used once it has been collected. As indicated by PWC’s survey.level of authority and oversight. the optimal location is where the privacy policy will best be enforced. Degree in History from Georgetown University. . implementation. Smith holds a B. Although not specifically stated in the US constitution the US Supreme Court has found the concept of "privacy" to be protected by a number of Amendments. While there are certainly many reasons for this.

Although most Internet users do believe there should be more laws to protect them and their privacy when on the Internet. once general Internet users are informed about how this profiling and tracking information is used they become very concerned about their privacy. Internet privacy issues arise because companies like DoubleClick and others use cookies. Then the more disturbing concern is that you don’t have any legal rights to see this profile that’s been compiled on you or the right to correct any errors that might exist. All this information once collected and correlated in a database helps to create an identifiable consumer profile. and the sharing of websites user registration data. the purpose for collecting the data. However. The depth of information collected for a user profile maybe such that the user is not personally identifiable.privacy is known as a "penumbra right. and disclose . this personal data is also sold to other marketing companies for use in direct mailings or for telemarketing. most individual believe something done in the privacy of their own home is their personal busy plus that fact that it is done in the privacy of their home leads to a false sense of security and privacy. The big concern though is that most Internet users don’t understand that they are being tracked and a profile built up on them as the surf the Internet looking for information and entertainment. So many Internet users believe these rights protect them. but more that likely the user’s personal identity is known. However. web-bugs. However. Article 10 states that the collectors of personal data must provide their identity. This tracking of individuals is done to obtain direct marketing information so a consumer can be targeted for personalized ads when surfing the Internet. The European Directive on Data Protection 1995. spyware. An example of what Internet users are looking for in the way of Internet privacy can be found in Europe where there are many laws and regulations protecting privacy. harvested email addresses from chatrooms. Although. These general Internet users also don’t believe a company has the right to sale their personal information for a profit without their permission. most disturbing is the fact that over 64% on Internet users don’t do anything to protect themselves once they find out about these practices." It is the essence of the Bill of Rights and thus a guaranteed right. In addition. The current feel seems to be nothing bad has happened to me yet so why worry.

These facts are quite unsettling for privacy advocates. However when asked if they believe that the US government would protect their personal data most individual didn’t thing the US government could be trusted either. To that end DoubleClick continues to defend itself while this legal void exists.8 million relating to the settlement of the pending privacy lawsuits. their data collection and other business practices. concerning Internet user privacy. More specifically. Also unlike the US. and use of information about and their disclosure of these information practices to Internet users.any third party recipients. these lawsuits allege that they unlawfully obtained and used Internet users’ personal information and that their use of cookies violates various laws. DoubleClick reported that they were a defendant in twenty lawsuits. In addition to legal issues arising from the DoubleClick’s core business. In April. As of December. maintenance. if federal laws requiring full disclosure of how personal user information is collected and used were to be passed better-educated Internet users would then force tighter control over how personal data is collected and used. websites can’t put in their term and conditions a statement that the use of this website constitutes permission to use personal data collected for marketing purposes. the company and some if its officers and directors were named in a suit pursuant to Section 11 of the Securities Act of 1999 and in a claim under Section 10(b) of the Securities Act of 1934. 31. 2002. most Internet users feel that private institutions and large companies won’t voluntary protect personal data they collected unless forced to by law. Until then many privacy advocates have been using existing laws and lawsuits to test companies’ rights to use personally identifiable information. 2001. Past and Present Legal Issues: In the Notes to the 2001 Financial Statements. a consolidated amended class action complaint alleging violations of the federal securities laws was filed in the United States District Court for the Southern . mostly class-action lawsuits. DoubleClick recorded a provision of $1. They were also the subject of an inquiry involving the attorneys general of several states relating to their practices in the collection. It’s also illegal to harvest email addresses form chatrooms or collect information for one purpose and then use it for another purpose. In the US though. However.

The second allegation is that DoubleClick fraudulently and intentionally misrepresented material facts regarding these advertising banners and their privacy policy. on July 10. There are five main allegations in this action. The company and some of its officers and directors were named in the suit pursuant to Section 11 of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934. 2003. a class action lawsuit naming DoubleClick as a defendant was filed in Allegheny County. However. So you first have to be tracked before . 2003. The fourth allegation is that the creation of the aforementioned nuisance was intentional and unreasonable. Finally. Also. any user of these tools must constantly update their data files with the latest privacy threats. Most recently. There are several companies that make software to eliminate tracking cookies and spyware from people’s computer. by interfering with the class members’ use and enjoyment of their property by the use of deceptive advertising banners. The first allegation is deceptive business practices by using advertising banners disguised as computer alerts or system warnings and these practices mislead the members of the class. in October. 2002 and was subsequently denied in February. A motion to dismiss the action was filed by DoubleClick in July. the fifth allegation is that DoubleClick intentionally and wrongfully invaded the class members’ right of privacy and right of association and non-association. the action against DoubleClick’s officers and directors was dismissed with the action against the company remaining. 2002. both public and private. The 2 most popular freeware programs are Ad-aware and Spybot-S&D which can be downloaded for the CNET website. The basis of this suit was the alleged failure to disclose the underwriters' alleged compensation and manipulative practices. Protecting your own Privacy: In the mean time Internet users are left to fend for themselves when it comes to protecting their privacy. Pennsylvania. These free tools let a user scan their computer for unwanted tracking agents and then allows a user to eliminate them. The third allegation is that DoubleClick created a nuisance.District of New York in connection with DoubleClick’s follow-up offerings. however. these tools provide an after the fact protection scheme since until a threat becomes well known it won’t be part of database of know items to scan for and eliminated.

Recommended Courses of Action: These ongoing litigations if successful though present a major item of concern for companies like DoubleClick.netatty. Firewalls can be setup to block unwanted outside accesses from getting into your system.com/cookie.html Howstuffworks: How Internet Cookies Work http://computer.htm DoubleClick: Electronic Commercial Communications – permission is the key . Not the best scheme for protecting one’s privacy. but once again flawed by the fact that the tracing agents have to be discovered first before you can be protected yourself from them.you can eliminate the tracking agent threat. firewalls require a very sophisticated user and someone who understands how the Internet data flow works in great detail. and then DoubleClick’s business model could be rendered invalid. A good concept. However. The ides is to install active software filters to prevent tracking agents from getting onto your computer in the first place. This is an item of great concern for DoubleClick as Internet users become more aware of how the data flow between their computer and Internet markets is actually working. If any of these lawsuits find the current Internet tracking practices illegal or laws are eventually passed prevent tacking. but tracking agents are similar to viruses in that it has to be known before you can guard against it. Firewalls can also prevent programs on your system from accessing blocked sites so they don’t send or receive unwanted information.howstuffworks. To that end some of these companies that offer the freeware tools also sell products to prevent known tracking agent from getting onto your computer. Another alternative is to use firewalls to prevent access to unwanted websites. References: Internet Privacy Law http://www.com/privacy/privacy.

pdf PricewaterhouseCoopers Article http://www.net/media_files/NSD/DCLK/reports/0110k.html Americans & Online Privacy: The System is Broken A Report from the Annenburg Public Policy Center of the University of Pennsylvania By Joseph Turow.pwcglobal.edu/faculty/culnanm/gippshome.org/ Internet Privacy Resources http://www.pdf Doubleclick 2001 Annual Report http://media.org/04_info_society/2003_online_privacy_version_09.msb.asp Lawsuit http://www. Ph.privacyrights.com/doubleclick/ .pdf Bugnosis Web Bug Detector http://www.nsf/docid/676BA6D02F9AA27285256B660 0617BF7 Doubleclick 2002 Annual Report http://media.com/emea/downloads/permission-eng.networkadvertising.org/netprivacy.bugnosis.D.net/media_files/NSD/DCLK/reports/DCLK02AR.corporate-ir.org/default.pdf Network Advertising Initiative http://www. http://www.http://www2.com/Extweb/industry.corporate-ir.ferencelaw.htm Georgetown Internet Privacy Policy Study http://www.doubleclick.appcpenn.