Privacy advocates sound alarms over Microsoft's bid to buy Yahoo

Possible merger raises similar online privacy concerns as the Google-DoubleClick deal did

The mere specter of a merger between Microsoft Corp. and Yahoo Inc. is sounding alarms among some privacy advocates, who say that any union of the two companies should be permitted only after a thorough investigation of how it would affect online privacy.

The privacy-related concerns raised after Microsoft announced its $44.6 billion offer for Yahoo this morning are similar to the ones that have been voiced in connection with Google Inc.'s planned purchase of online ad-serving vendor DoubleClick Inc. In both cases, the concerns center on the possibility of vast amounts of consumer tracking information being consolidated in the hands of a single vendor.

The proposed combination of Microsoft and Yahoo "has far-reaching implications for consumer privacy," said Jeff Chester, executive director for the Center for Digital Democracy (CDD), a not-for-profit advocacy group in Washington. Chester added that in the wake of the Google-DoubleClick deal, which was announced last April, it was inevitable that Microsoft would respond. "We predicted this day would come, but it has happened a lot sooner than we though it would," he said.

Microsoft executives said today that buying Yahoo would help make the software vendor more competitive with Google in the market for online services, such as search and advertising. During a conference call this morning, Kevin Johnson, president of Microsoft's platforms and services division, said that the online services business currently "is ruled by one" -- i.e., Google. "The industry will be better served by having competition," Johnson said.

But Chester claimed that by pitting Microsoft and Google against each other in a battle for online supremacy, the proposed acquisition would only exacerbate the practice of tracking the online activities and behavior of Internet users in order to serve up highly targeted ads to them.

"This is about two competing digital behemoths having the ability to collect and use an unimaginable amount of personal information about each and every one of us, and giving it to an array of advertisers large and small," Chester said. "In the end, there will be just three places all the information will be: Google, Microsoft and the NSA" -- a reference to the National Security Agency.

Both the Google-DoubleClick deal and Microsoft's proposed acquisition of Yahoo are being driven by a desire to expand online advertising, said Marc Rotenberg, executive director of the Electronic Privacy Information Center (EPIC) in Washington. That necessarily involves user profiling and behavioral targeting, both of which should be examined more closely by the Federal Trade Commission, Rotenberg said.

EPIC and the CDD were among the three privacy groups that filed a petition last spring asking the FTC to put a stop to the acquisition of DoubleClick unless Google made significant changes to its data privacy policy. But the commission voted 4-1 to approve the deal last month, saying as part of its decision that the combination of Google and DoubleClick wouldn't create any unique privacy concerns.

Rotenberg said that with Microsoft's offer for Yahoo now on the table, "the FTC needs to step up and do what it failed to do" in its consideration of the Google-DoubleClick deal. But, he added, Internet users simply are not at the table when the FTC is looking at such deals.

"We do find a problem in the old-style merger reviews, which just look at the impact on the competition and not on privacy," Rotenberg said. "There needs to be a process to ensure that privacy interests are considered."

Joseph Turow, associate dean of graduate studies at the University of Pennsylvania's Annenberg School for Communication, said Microsoft's move is "a natural response to government failure to try and regulate the role of conglomerates on the Web."

It isn't clear how the combination of Microsoft and Yahoo would affect online privacy, Turow said. "But one of the key drivers of this merger, just as it was in the case of Google and DoubleClick, is the desire to be able to try and track and target and customize material for people around the globe."

Such tracking and customization of content and advertising "is, in a sense, discrimination," Turow added. "The federal government, which should have been the guardian of the public interest, has dropped the ball."

Pam Dixon, executive director of the World Privacy Forum, said that at a high level, Microsoft and Yahoo have different internal cultures from a privacy standpoint. Whereas Microsoft has been more willing to engage with privacy groups in the past to try and address concerns, Yahoo has been less willing to do so and also isn't as transparent about its privacy practices, Dixon asserted. Little information is available about the types of consumer tracking and behavioral profiling that Yahoo engages in, she said.

If the acquisition goes through, "protecting privacy in the online environment is going to be pretty tricky" for Microsoft, Dixon said. "The question is whether Microsoft will take Yahoo's approach, or if it will put its own imprimatur on it and make Yahoo more privacy-friendly?"

Copyright © 2008 IDG Communications, Inc.

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