April 9, 1998 1:30 PM PDT

Microsoft to buy Firefly

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Microsoft (MSFT) today announced a deal to purchase Firefly Network, a developer of personalization software, a move that was immediately criticized by privacy organizations.

Microsoft said it hopes the deal will accelerate its delivery of privacy-rich products to the Web, especially those that meet the Platform for Privacy Preferences protocols considered by the World Wide Web Consortium. The company wants to increase consumer acceptance of the Internet by developing privacy technology that puts users in control of their personal information.

Firefly's flagship product, called Firefly Passport, is used to collect user preferences anonymously, recommend Internet content, and send appropriate advertising. Firefly has stringent privacy policies that are incorporated into its technology, according to the company.

Organizations devoted to protecting the privacy of individuals on the Web were quick to denounce the planned acquisition. "If Microsoft keeps buying Internet companies and fuses their customer databases together, Gates will be called Big Brother Bill," Jason Catlett, president of a privacy and antispam group called Junkbusters, said in a statement. "To allay privacy suspicions, Microsoft should declare a policy of openness about the data it keeps and what it buys from marketers."

Details of the agreement were not released, but the Wall Street Journal reported that the deal is worth about $40 million in stock, cash, and assumed debt. However, Firefly CEO Nicholas Grouf said details are still being negotiated and called reports on the deal's price "erroneous."

The two companies have been in discussions for only a brief time, Grouf said, adding the companies have maintained a close relationship since they joined an authoring group to define a specification known as ICE (Information & Content Exchange), which has been backed by Firefly.

"The general theme is to make the privacy technology as widely available to our customer as possible," said Ed Graczyk, lead product manager in the Web essentials group at Microsoft. It will be employed in all of the company's online product and services, as well as at MSNBC, he said.

Reaction from the industry was positive, as most analysts and vendors alike see Microsoft's entry into the market as a way to help build trust and confidence in ecommerce and the Web in general.

"As Microsoft deploys Firefly's customer controlled profiling product to a larger consumer audience, we will continue to support these efforts because they broaden the market for personalization solutions," said Steve Larsen, vice president of marketing and business development of Net Perceptions, a former competitor of Firefly.

Based in Cambridge, Massachusetts, Firefly was one of the first companies to develop privacy practices and technology that give individuals control over what personal information, such as name, address, age, interests, and credit card data, is provided to any given Web site. The company helped to drive industry privacy standards, including the P3P and the Information and Content Exchange protocol, which enables the trusted exchange of information and content on the Internet.

"Firefly demonstrated how millions find mass customization of sites worthwhile and that this can even be done while retaining the anonymity that so many crave," Catlett said. "But the millions who have given their names, email addresses and other personal details to Firefly may be disturbed to find Microsoft owning it."

The company was founded in 1996 by Massachusetts Institute of Technology professor Pattie Maes, and former student Max Metral, who is now chief technology officer. Maes is not moving to Redmond and will continue to teach at MIT while maintaining her board membership at Firefly.

"I am very excited about this acquisition because the ideas and products we developed on how to do personalization while ensuring privacy now have the best chance of becoming widespread, affecting everybody's lives," Maes said in an email interview.

Firefly will be moving its offices from Cambridge, Massachusetts, to Microsoft's headquarters in Redmond, Washington, where its employees will report to the Web essentials group, part of Microsoft's interactive media division. "We will continue to drive the same initiatives we did from here over there," Grouf said.

 

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