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AOL's trove of user data holds riches, privacy risks

DoubleClick Inc. may be the current target of Internet privacy worries. But when it comes to tracking online habits, few companies are in a stronger -- or trickier -- spot than America Online Inc. The online service keeps records on more than 21 million subscribers, including names, addresses and credit-card numbers. Although AOL says it doesn't watch users' travels on the World Wide Web, its system automatically tracks their movements within AOL's service -- including chat rooms, e-mail and news services -- where users spend 85 percent to 87 percent of their time online.

"AOL is probably sitting on a bigger wealth of information about consumers than any other entity," said Jeffrey Minsky, director of media convergence at WPP Group Plc's OgilvyOne, a New York ad agency. That data could bring huge revenue if AOL packaged it for sale to retailers, banks, insurers and others dying to know which AOL customer is most likely to snap up their products and services. Cautiously walking a line, AOL says it has never sold data about its members' movements within its system.

"The notion of having someone track where individual users go online took us in a direction we felt was inappropriate," said Kathy Bushkin, an AOL senior vice president. She said AOL's privacy policy is "one of the strongest in the industry."

The policy leaves AOL room to use some of its valuable data. Like many marketers, it sells subscribers' names and addresses to junk-mailers -- a practice that it discloses in its privacy policy. It also buys information about its members -- like which computer a subscriber owns -- from outside suppliers and uses that data to target advertising when a subscriber goes online.

AOL could gain another rich source of data when it completes its proposed acquisition of Time Warner Inc. The media giant has information on the reading and listening habits of the 65 million households that receive its books, magazines and compact discs. Indeed, privacy was a major concern of lawmakers at recent Senate hearings on the deal.

Some rival online providers track subscribers' movements and sell what their surveillance turns up. For instance, NetZero Inc., a provider of free Internet access, creates thorough profiles about users partly by tracking where they go online.

The company uses the information to deliver targeted advertisements to its users, according to its privacy policy. NetZero, however, insists that it doesn't share with outsiders any personal information about users unless they consent to it.

In a delicate balance of privacy and profits, AOL has opted thus far to focus on attracting and keeping paid subscribers, who in turn draw advertisers to the largest Internet audience. If AOL began selling detailed information about subscribers, it could risk a user backlash and regulatory review.

Just look at DoubleClick, the big Web ad-placement company that helps advertisers track users' online behavior. The Federal Trade Commission is investigating the company for potential privacy violations. DoubleClick says it has done nothing wrong.

The company's privacy policy says AOL uses "publicly available consumer data" on its members to help decide "which marketing offers to make and which advertising they see." The spokesman said only about 2 percent of AOL's ads are targeted at users on the basis of outside data.



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