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Amazon Modifies Purchase Circles Following Controversy

On the heels of criticism from Internet privacy groups, Amazon.com Friday said it plans to modify its purchase circles and allow its customers to exclude their purchase information from showing up in the feature.

Following concerns voiced by groups such as the Electronic Privacy Information Center, Amazon (AMZN) said it also plans to remove specific companies from the purchase circles at their request.

"Privacy is of utmost importance to our customers and to us," Warren Adams, Amazon's director of product development, said in a statement.

"While the vast majority of feedback from our customers indicates that purchase circles have been well received and extremely valuable in making informed purchase decisions, some customers have expressed concerns, so we're letting people decide individually," Adams said.

Purchase circles are specialized bestseller lists that rank the top-selling books, CDs and videos among Amazon customers according to geographical regions, corporations and colleges and universities. Amazon draws the information from its database of 10.7 million users and tracks the amount of merchandise sent to particular zip codes as well as the amount of orders generated from domain names. The anonymous data is then aggregated and applied to an algorithm which creates bestseller lists of products bought most often within a specific group.

Amazon initially said customer privacy is not violated since data is aggregated anonymously and none of the information gathered is associated with an individual. The information is updated weekly for larger groups of purchase circles and monthly for smaller groups.

Before reversing the policy, Amazon defended the feature, saying it's a "fun way for people to find out what others are buying yet still maintain individual confidentiality."

The move worried privacy advocates from the beginning.

"This raises a red flag," said EPIC's general counsel, David Sobel. "It's a borderline privacy issue right now. Purchasing information is being collected and profiles created which will raise questions in the minds of users."

Sobel believes the purchase circles underscore the fear that the Internet is not an anonymous environment.

"This undercuts the comfort level for consumers...people might have concerns and have second thoughts about using a service that keeps that kind of information," Sobel said.

On the other side of the coin, Jupiter Communications e-commerce analyst Ken Cassar doesn't view purchase circles as a threat to e-consumer privacy.

"This is not a legitimate privacy issue," Cassar said. "Amazon has gone to great pains to explain that there are no purchase circles unless there is critical mass. They're not collecting new information, just publishing it."

As for the buying habits of corporations listed in purchase circles, Cassar downplays the idea of corporate spying based on what the best selling book is at Intel is, for example.

"Unless you're the CIA and your reading list gets out, I don't think it's a problem," Cassar said. "If you look at the reading lists of corporation, they're all pretty similar."

As far as driving sales and getting more customers on the site, Cassar believes purchase circles won't pack that much of a wallop.

But the ensuing publicity surrounding purchase circles may be a no-publicity-is bad-publicity factor and curiosity as to what plays in Peoria may just add some sales dollars.

"Amazon.com must continue to be an innovative pioneer, and pioneers inevitably create some controversy, as we did four years ago when we first let customers post negative reviews of books and as we didone year ago when we started publishing storewide sales rankings," said Jeff Bezos, Amazon.com founder and CEO.

"The one thing that we'd like everyone to know is that even as we explore the unknown, we'll always be trying to do the right thing, and we'll always be listening to our customers," Bezos said.