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Businesses Cash In on Web Privacy Concerns

Friday, 20 Aug 2010 | 12:48 PM ET
Emma Innocenti | Getty Images

As online breaches continue to rise, new companies aiming to guarantee that customers' data is secure are springing up, thanks to the investments of entrepreneurs and venture capitalists who are pouring tens of millions of dollars into tech startups.

Forrester Research, which reported that data breaches are reaching 100 million in the US alone, said that protecting online identity is a $2.5 billion market, growing 12 percent to 15 percent annually.

Within that sector are those that cater to individuals and small businesses. It alone is a $50 million market, which is growing by some 20 percent a year.

Startups are leading the way.

Tangled Web//Profits & Privacy - See Complete Coverage
Tangled Web//Profits & Privacy - See Complete Coverage

Among those startups are ReputationDefender and Social Shield, which allows parents to monitor their kids' online activities.

ReputationDefender just snagged another $15 million in venture funding, led by the venture capitalist Kleiner Perkins.

The site charges individuals and small businesses between $100 and $1000 annually to monitor what is said about them online and to control what users see about clients when they are "Googled." If the comments are unfavorable, ReputationDefender can push the undesirable content down on the search results.

Social Shield charges parents $100 a year to monitor what their children are doing online. With an estimated 15 million households with children between the ages of 11 and 17, that's potentially a lot of Benjamins.

Hot Privacy Start-Ups
A number of start-ups are turning personal information often found on social networking sites, into a money-making venture, with CNBC's Julia Boorstin and Dennis Kneale.

Brian Ascher, a partner at venture capitalist Venrock, estimated that this child sector will expand to a $1.5 billion market and further maintains that this kind of service could become as popular as anti-virus software is now.

The gold standard for the data-protecting companies is Truste, which launched nearly 15 years ago. Among its clients, who are in the thousands, are heavy-hitters Apple , Yahoo , eBay and Microsoft .

Truste continuously monitors the clients' sites, alerting them if there seems to be a problem. Venture capitalist firm Accel, which backed Truste, said that the company generates tens of millions of dollars annually and is growing 50 percent to 75 percent a year.

Other established names that maintain privacy for their clients are credit rating agencies like Equifax, which monitors credit scores, and the security and storage company Symantec.

Look for reports from Jon Fortt, Hampton Pearson, and Julia Boorstin, Wednesday August 18 through Friday August 20—part of CNBC's specal series "Tangled Web: Profits & Privacy."

Questions? Comments? MediaMoney@cnbc.com

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  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.