CDD Not Giving Microhoo a Pass

This leads us to the issue of how consumer watchdogs will receive a Microhoo partnership designed to improve market competition versus Google.

Chester told eWEEK Microsoft's elaborate data collection services across platforms and applications pose a concern for consumers. His Center for Digital Democracy is treating it much the same way the group scrutinized Google's acquisition of DoubleClick, which CDD argued would enable Google to have a treasure trove of data on consumers all over the world.

"[Microsoft and Yahoo] have competing ad targeting businesses in search, display and mobile, for example," Chester said. "They also have now competing ad targeting research and development efforts. Beyond the U.S., there are important competition and privacy issues for the EU as well. EU-based consumer groups will work closely with colleagues here, as we did in the Google/DoubleClick deal."

He added that Microsoft and Yahoo should expect privacy and consumer groups to "vigorously press" regulators to closely examine the deal and at the very least impose a series of tough conditions on data collection practices, including making their online marketing systems more transparent. He also warned:

Privacy groups, such as my CDD, have been collecting 'string' on both companies, in expectation of a deal. We will provide this information to the FTC or DOJ and the Congress. A merger that further concentrates control by a very few over the digital marketing and advertising business illustrates how quickly consolidation has emerged as a principal and worrisome feature of the Internet era.

Charlene Li, analyst for The Altimeter Group, noted that privacy is a passionate issue, particularly "when giants and oligopolies are involved."

Despite the efforts of the CDD and other consumer interest groups, Li said she doubts that the FTC and Justice Department would object strenuously based on the privacy issue because they are eager for there to be a strong competitor to Google.

Instead, they will ask Microsoft and Yahoo to ensure appropriate safeguards are in place to protect personal information exchanged between the two companies.

"I'm also being realistic -- Yahoo couldn't get search and display advertising data integrated when it was in-house," Li said. "Search today doesn't have persistent session data being collected to inform better ad targeting either (although Google is collecting all search results for personalized search history, they aren't doing this to inform ad placement). So while it's possible to merge search and display ad data to create a warehouse of personally identifiable information, it's not likely."