June 4, 2002, 12:00 AM

Consumers are concerned about online privacy, but few understand it

70% of consumers express concern about their privacy online, but only 40% read privacy statements before giving personal information.

Internet Retailer

Though consumers express concern about their privacy online, few read web site privacy statements before supplying personal information to them, and even fewer understand those privacy policies, according to new research from Jupiter Media Metrix. While 70% of U.S. consumers are concerned about their privacy online, only 40% read the privacy statements and only 30% of online consumers find the stated privacy policies easy to understand.

Jupiter’s research reveals a similar disconnect between consumer’s concerns about online privacy and their seeming willingness to provide personal information in exchange for small benefits, even when they may not clearly understand how their information will be used or how widely it will be shared. Some 82% of online consumers polled say they’re willing to provide various forms of information to retail web sites in exchange for something as modest as a $100 sweepstakes entry. Consumers are most willing to offer e-mail addresses (61%) and full names (49%); and less willing to provide household incomes (18%) and phone numbers (19%).

"Neither consumers nor businesses effectively address online privacy issues," says Rob Leathern, Jupiter analyst. "In this increasingly complex world, even legitimate businesses will suffer if consumers’ perceptions of the control and safety of their personal information are damaged."

Jupiter estimates that as much as $24.5 billion in online sales will be lost by 2006 – up from $5.1 billion in 2001 – due to consumers` concerns about online privacy. Online retail sales would be an estimated 24% higher in 2006 if consumers` concerns in this area were effectively addressed, according to Leathern.

"With poor online privacy practices, many companies will experience negative effects not only on their online sales over the next several years, but also in offline sales that shift to more privacy-sensitive concerns," he says. To tackle the problem, online companies should treat online privacy like a strategic marketing initiative rather than a compliance burden, and allocate resources accordingly, he adds.

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