In its second-largest acquisition, Amazon buys the company for $970 million.
There’s a tug of war going on over consumer privacy on the web. Consumer advocates are demanding more of it, but marketers argue that prices will go up if they can’t pinpoint their marketing targets.
By the end of summer, 20 million consumers will have a copy of the AdSubtract software that allows them to block ads and cookies coming into their computers as they browse the web. Those who activate the program will join the 500,000 consumers who have already picked up the AdSubtract software from AdSubtract’s web site.
InterMute Inc., developer of AdSubtract, is building its business on the belief that a fair proportion of consumers don’t like ads and cookies. “People really are in a battle for their privacy,” says Ed English, CEO of Braintree, Mass.-based interMute. “Web sites are using a stealth technology. They assume they can just put cookies down and track them.”
While English is betting that his business can thrive on outraged consumers who resent what seems to them surreptitious gathering of personal information, others argue that the information is crucial to the success of web-based retailing. Retailers would be foolish not to take advantage of the opportunity to pitch products to customers most likely to be interested in them, they argue.
The technology that makes possible the sending of follow-up e-mails to buyers of a product also allows retailers to reduce their marketing and customer acquisition costs. Those retailers, in turn, can pass the savings on to their customers in the form of lower prices, some observers say. “There is a real risk to direct marketing if these technologies gain momentum,” says Michael Petsky CEO of the Winterberry Group, New York-based direct marketing research and consulting company. “If a significant proportion of the population tried to prevent online targeting, marketers would have to rely on more costly offline marketing methods that they’ve used in the past.”
Drawing the lines
The two positions are the battle lines in the fight over privacy on the Internet. And as with most contentious issues these days, the majority of consumers fall in the middle. There’s plenty of anecdotal evidence that consumers are willing to give up degrees of privacy that range from trivial to significant to get something in return. For instance, consumers who sign up for AT&T WorldNet’s i495 Internet access give AT&T permission to track their movements around the web. In return, they get Internet access for $4.95 a month vs. WorldNet’s usual $19.95 or $21.95 price. AT&T won’t say how many customers it’s following around the web, other than to say that within a short period after i495’s introduction, hundreds of thousands of customers had signed up for it.
Others willingly give up personal information in return for deals on merchandise. Many sites, for instance, gather data from shoppers so they can send them e-mail reminders of important dates or notification of sales. “People think there’s value in doing that,” says Lee Rainie, project director for the Pew Internet and American Life Project, which surveyed American web users’ attitudes toward privacy. “They’re pretty eager to give away pieces of relevant information in return for not a lot of value. After all, my shopping preferences aren’t the biggest deal in the world.”
But whatever their behavior, consumers tell researchers they are concerned about their privacy on the Internet. In the Pew survey, which was released last August, 54% of Internet users said they believe tracking of their behavior is harmful because it invades their privacy.
The Pew study also determined that 60% of all Americans are “very” concerned about privacy on the web, with 64% of American who are not online and 54% of Americans who are online stating they are very concerned. The spread is even greater between experienced and inexperienced web users. Among those online more than three years, 50% were very concerned about privacy while among those online less than six months, 62% were very concerned.
Indeed, there are no easy answers and there is no easy solution. Some advocate increased consumer education, with the belief that if consumers know how a retailer is using the information, they would be more comfortable providing it. “In most cases, if consumers are made aware of what information is being collected about their Internet movements and activities, they are less likely to object to this action,” says a white paper “Connect with Your Customers! Personalization in the Internet Age” from the Software and Information Industry Association.
That association submitted a position paper April 25 to the Congressional Internet Caucus, made up of 100 members of Congress. In it, the association notes that it strongly urges its 1,100 members to adopt explicit privacy policies on the web, yet it also says that legislation is inappropriate.
That association was reacting to a number of bills aimed at protecting consumer privacy on the web. Three such bills were introduced into the House of Representatives in January. But while those bills got the attention of e-retailers and other Internet-based marketers, passage of such legislation this year is questionable at best. “Nothing has moved,” says Sarah Whittaker, senior director of government relations with the National Retail Federation.
For one thing, even though consumer concern is high, there has been no public outcry over the issue. For another, no strong leadership on the issue has emerged yet in Congress. And finally, some feel that the industry-either with self-policing policies or by the spread of technology-will outpace Congress. “There are many, many such bills in Congress and it’s unclear which house will lead and which bill will be a leader,” says Ted Karle, e-commerce lobbyist for the Software and Information Industry Association. “They have set a very ambitious agenda, but there’s not been much movement on the issue. Passage is in question.”