I know that a bunch of more-important-than-me people are trying to figure that one out. In short, Google wants to pay $3B for Double Click. Microsoft (look who’s talking…) is saying that the deal will create “the largest database of user information the world has ever known” and warns that user privacy is at risk.

Personally, I think that Google, which has nothing to gain but everything to lose if it mistreats personal data, is a fairly safe choice when it comes to data handling and privacy. Compare Google to the 1000 web 2.0 companies that deal with sensitive data every day. You know the stats: 5 out of 100 start-ups will make it. What will happen with all the data they have gathered after operations are shut down? Let me guess, at least some of it will be kept by the founders or even ex-employees.

To illustrate the idea, I made up a web 2.0 startup. It is called: IILoveMyNeighbors.com (I know the name is stupid but the domain is available…). Tom and Jack, 32 year-old college friends, left Sun and HP to begin this start-up, that will help create better friendships between neighbors. After all, it would be great for once to greet your neighbors by name…

Like your typical web 2.0 site, you sign in by creating a profile with a bunch of useful data for your neighbors. It has the names of all your family members, date of birth, profession, education, hobbies, selected possessions and much more. It also allows your neighbors to add valuable data as they use the site. The full profile is obviously visible only after the user has approved the connection (think facebook) so it feels safe to add a lot of data on you and your family.

The first year after the first beta ended was a blast: 7M households, more than 5% of the total population signed up. The site worked much better in strong communities where the average household income was above 100K/year. The end of the second year was not as good: people got bored with the service and it did not stick. With 8.5M households in the database and less than $1M to spend, the board decided to shut down the operations.

Tom and Jack got back to the job market. After 3 years of college grad salaries they had to work twice as hard to pay the loans and put some money back in their kids’ savings. Tom got the idea after Jane called him and asked for a favor: she wanted to buy a house in Beaverhills, CA and wanted to learn more about her future neighbors before closing on the house. The information turned up to be very useful, and Jane was very happy. She suggested selling rights to the data to telemarketing companies. Tom, knowing that D&B or InfoUSA will never buy the data, as selling it was against the end-user license agreement, contacted telemailAmerica.biz, a small telemarketing agency looking for an edge. The up-to-date information, validated by neighbors, was very appealing to them. They planned to merge it with the data they bought from MyFriendsFromSchool.com and get an effective edge over the competition. It was not kosher but was a low-risk, high-reward deal for both sides. The deal was inked (they actually just shook hands…) and Tom was nominated as a special consultant for telemailAmerica.biz so that they could pay him the agreed upon $500K without raising any questions.

Sounds like my wild imagination? it is… but it does not sound like something that can never happen. Actually, it sounds pretty reasonable that out of 1,000 honest founders, 5-10 will go bad. But, try to replace the name IILoveMyNeighbors.com with Google and see if the story still makes sense. I don’t think so.

Gadi Shamia