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Are Amazon.com's Assets Yours?

Amazon.com last week made clear what many customers already knew to be true: The Internet retailing giant considers the personal information it gathers from members to be its own property, and thus will do whatever it wants with the data, including selling it.

While that wasn't Amazon.com's intended message, it is the bottom line. The company's announcement of a revised privacy policy hardly was made in the spirit of candor. Rather, Amazon.com is responding to growing resentment among consumers and consumer advocates toward what they consider to be a blatant violation of their privacy by revenue-desperate Web companies.

But the real target of Amazon.com's revised policy isn't the parent shopping for the latest Harry Potter book or a college student ordering the new Korn CD (assuming, of course, they didn't just download it from Napster for free). It's federal and state officials who are casting an increasingly litigious eye on the collection and sale of personal information by Internet companies.

The issue erupted dramatically in July when the Federal Trade Commission sued Toysmart.com to prevent the failed online toy merchant from selling its customer list to help repay creditors after promising customers all private information would be kept confidential. Toysmart.com filed for bankruptcy after majority owner Walt Disney Co., withdrew financial support in May.

An adverse precedent set by a court ruling or intervention by the FTC could seriously diminish, or even render worthless, the value of customer data collected online. This presents a real danger to investors in Amazon.com or any company that counts customer information among its tangible assets.

Indeed, it may be that one of the reasons so many e-tail and content stocks have fared even worse than those in other sectors this summer was a growing (and valid) realization among investors that a large chunk of those companies' assets in the form of customer databases might evaporate. Buy.com , for example, is down 35% since July 11, when the FTC announced its lawsuit against Toysmart.com. Another major e-tailer, Barnes & Noble.com , is down 36% in that time. And both these stocks already had dropped drastically since March.

I doubt Amazon.com's bid to allay privacy fears will work if anyone reads the fine print. In its lengthy policy statement, the company insists that "information about our customers is an important part of our business, and we are not in the business of selling it to others."

However, several paragraphs later we are told that "in the unlikely event that Amazon.com Inc., or substantially all of its assets are acquired, customer information will of course be one of the transferred assets."

Personally, I find this less than reassuring, especially since I don't consider a buyout or even the eventual disappearance of Amazon.com to be an "unlikely event." The e-tailer is a huge money-loser and has yet to prove that its business model works. Why wouldn't I expect it to leverage my personal information in an effort to turn around its finances?

Especially when you consider what Amazon.com's customer list might be worth. Toysmart was offered more than $50,000 by one prospective buyer for its list of 250,000 customers. What's the value of Amazon.com's list of 23 million registered users? It may well be a good chunk of AMZN's $17 billion market capitalization. Given the threat posed by potential legal rulings restricting how Amazon.com and others dispose of their customer list