Yahoo Probe by FTC Underscores Online Privacy Fears

The statement by Yahoo, Inc. yesterday that the Federal Trade Commission inquiry into the company’s personal data gathering practices has “nothing to do with advertising profiling” may not satisfy privacy advocates.

Part of the problem is in the definition.

Profiling is a technology that tracks a Web visitor’s movement on a site in an anonymous fashion and cannot be traced back to that visitor’s offline identity. It helps marketers personalize advertisements and offers.

San Francisco-based Yahoo revealed in a filing to the Securities and Exchange Commission Thursday that it was voluntarily cooperating with an inquiry on how Internet sites gather information. The probe was sparked by a report by the California Healthcare Foundation that said, “Health sites are sharing the personal information they collect from visitors without their knowledge or permission.”

Sam Karp, chief information officer for the Oakland, CA-based Foundation, said, “It’s very much about profiling, and that is the concern–that there is tremendous amount of data available because of what the cookie captures.”

The Foundation is also concerned about possible privacy violations when visitors turn over personally identifiable information about themselves when they sign up for a newsletter, for example, or purchase a product. And it is worried about the site marrying that data with the cookie data and selling it to a third party.

But marketers point out that profiling is ubiquitous in e-commerce. “Every site is doing it,” said Jay Schwedelson, corporate vice president for Worldata/WebConnect, Boca Raton, FL. “There isn’t a major site on the Internet that isn’t `cookieing’ individuals when they get to their sites.”

But there is a difference between this kind of data collection and the sort that Internet advertisement provider DoubleClick is doing–and being questioned about by the FTC and five state attorneys general. DoubleClick, New York, tracks Internet visitors’ movements across the many sites they visit.

“Most sites are only doing it for users coming to their own sites,” added Schwedelson, an advisory board member for the Association for Interactive Media.

In its report, the Foundation looked at 21 Web sites including Yahoohealth. “Problems found at Yahoo were no different than the problems found at any health site,” Karp alleged.

Since the report was released, many sites have changed their privacy practices to better disclose how information is being collected and used, and to talk about any third party to which the information was transferred.

Internet privacy experts said that Yahoo’s size and visibility on the Web were bound to attract FTC attention. And. they pointed out that Yahoo has been a leader in privacy issues.

The FTC began looking into the operations of several Web sites last month. The agency reportedly sent information requests to HealthCentral.com and i.Village.com.

“We believe the Internet offers tremendous opportunities to improve the quality of healthcare and the ability to measure the quality of care,” Karp said. “We’re concerned that unless privacy safeguards are put in place, the Internet won’t be able to fulfill the promise that it offers.”