It's pretty hard to move around the Internet today without leaving behind a trail of information. Any time that information can make someone money, you can bet that they will figure out a way to collect it. Although privacy is always a concern, users often don't realize the value of the information they're giving out for free, even when it's anonymous.

With that in mind, Microsoft's Steve Ballmer is raising questions about Google Toolbar and the information it collects. Ballmer's not assaulting Google for having a toolbar--Microsoft just cut a deal with HP to bundle his own company's Live Search toolbar--but he asks if users understand what the toolbar does for (and to) them:

Why is that toolbar there? Do you think it is there to help you? No. It is there to report data about everything you do on your PC. I am not trying to say this is nefarious or bad, I am just saying being clear is probably the most important thing. And any user can say, “This is clear and this is OK with me.”

I have to take issue with Ballmer's characterization; a good tool should be there to help you. That is the reason you installed it--or, if it came with the PC, the reason you don't remove it. If it doesn't offer enough value to justify the space it takes on the screen, it should be gone. Any Internet-based tool should be a win-win situation; the user gets a useful function such as improved searching; the tool provider finds a way to monetize the tool, potentially by using the data they get in a responsible way.

Google's webmaster tools are another great example of a win-win situation. Webmasters can use Google's tools to find missing pages, track site errors, and measure visitor traffic using Google Analytics. All that data goes to Google, of course, but it also goes back to the webmaster in the form of incredibly detailed reports. I am happy to let Google have that data if I can get that much value out of it. Disclosure is important to be sure; Google Toolbar sets a good example by letting people know what's being sent and having them opt in to features that require more data disclosure.

Adware and spyware are at the other end of the spectrum. These are foisted off on users using dicey exploits, unkept promises, and false pretenses. Their content often targets kids, who are a proven endless reserve of poor judgment. The "value" this software offers, if any, is outweighed by its intrusiveness and annoyance. And what do you know, in 2005 Microsoft considered buying adware-maker Claria, although Microsoft was tight-lipped about the talks.

I hope that Microsoft does compete on privacy policy. It's absolutely true that people are willing to give up information if they know how it will be used and don't fear its misuse. I also hope that Ballmer learned something from the outcry that resulted from just the hint that Microsoft might have been thinking about buying Claria. It's not enough to stay within the letter of the law on a privacy policy to succeed with users; they need to trust that you intend to stay within the spirit of the agreement as well.

Most of all, Ballmer needs to change his attitude about online offerings. His feeling seems to be, "Okay, we're going to track you, but at least we'll be clear about it." Instead, he should look at Google's approach: provide online tools and products that offer users enough benefits that they're willing to share their information to reap those benefits.