With more than $11 billion in acquisitions this year aimed at reshaping Internet advertising, Microsoft, Google and Yahoo are ready for the competition to pick up steam.
But consumers have privacy concerns.
Members of the online social network Facebook howled this month after it launched Beacon, an ad feature that tells your friends about your shopping habits. Facebook was forced to let users turn off the service.
"Beacon fell victim to a poorly thought out plan of execution," says Kevin Lee, founder of search-consulting firm Didit.
Advertisers hope to reach consumers visiting Web sites such as Facebook, MySpace and YouTube. Microsoft, Google and Yahoo want to help advertisers track consumer behavior, then pitch products dovetailing with an individual's interests.
But pitfalls await tech giants' "targeted advertising." They are:
Privacy fears. The Federal Trade Commission last week approved Google's $3.1 billion merger with ad-placement giant DoubleClick. But congressional hearings on privacy are set for this spring, and consumer advocates are clamoring for limits on Google's use of behavioral data.
Lack of sizzle. Microsoft paid $6 billion for ad-placement firm aQuantive and $240 million for a 1.6 percent stake in Facebook. It aims to use aQuantive's technologies and user-preferences data from Facebook to place targeted ads anywhere Windows is in use.
Too stealthy. Yahoo picked up ad-exchange network Right Media for $680 million and ad-targeting firm BlueLithium for $300 million. Yahoo must "reinvigorate its technology groups" and start "executing with precision and speed," says Lee.