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July 2000 |
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For Whose Eyes Only
Privacy fears lead some e-retailers to open up about information they collect. But personalized shopping remains important.
By Leslie Beyer
To understand how far Internet privacy has climbed on the agendas of e-retailers, consider that Garden.com recently tripled the size of its “privacy pledge,” detailing in three pages, instead of one, how it collects and uses customer information. “We wanted to make sure that it was as clear as possible that we do not gather any information that customers are unaware of,” says Wendy Carter, marketing manager of the Austin, Texas-based site. “It is explicitly asked for.”
What’s also explicit is the careful balance e-retailers must strike between consumer demand for personalized shopping and their concerns about privacy. According to e-commerce consulting firm Jupiter Communications of New York, more than 80% of Web sites personalize content for their visitors, whether based on previous shopping or from surveys. Not surprisingly, most consumers like it when sites pay attention to their interests and needs, with more than 70% saying they want customized pages. But the recent uproar over now-shelved plans by ad-serving network DoubleClick to create consumer profiles shows there are strict limits that consumers place on information gathered about their online activities—and a whole lot of anxiety about being watched at all.
“There are really very few merchants out to ‘e-screw’ their customers by doing malicious things with their inform-ation,” notes Bonnie Lowell, founder and chief technology officer of YOUpowered, a New York company that provides free consumer and e-business privacy software. “But it’s frightening that we’re living in a time where thousands of businesses will suddenly band together and collect information about you and share it with one central source,” Lowell adds. “That’s why the privacy issue has escalated as fast as it has. That’s why people are arming themselves.”
Companies such as Microsoft have introduced tools that give consumers more control over how much personal information they divulge. Using new standards known as the Platform for Privacy Preferences, or P3P, consumers will be able to translate complicated privacy policies and help squash “Web bugs” that surreptitiously track online behavior.
Data anxiety
Though Garden.com did not keep an official count or track hits to its privacy page, according to Carter, the customer service department steadily fielded calls from customers wanting to clarify how the site uses the data it gathers about them. The revised pledge is wordier, but there’s no fine print. It begins by describing the benefits for customers who register with the site, such as: receiving previews of sales and promotions, designing a garden with its free Garden Planner software, asking questions of its Garden Doctors and receiving customized regional gardening information.”
The policy then lays out the basics—discussing how the site ensures that orders and credit card numbers are kept secure, defining digital ID tags better known as cookies and how the site uses them, and promising customers that data is never sold or shared, not even with its partners iVillage, America Online and Excite@Home. Carter says this is merely Garden.com’s disclosure that its customer profiles and survey data are all about making the site a better and more personal place to shop. “We do it to provide customers with a landscape of ideas and information about plants suitable for their area of the country,” she says of creating customer profiles. “It helps us better personalize the relationship. That means we have to understand what kind of gardener they are, where they live and what the conditions of their backyards are.”
Knowing the condition of your customer’s backyard, bookshelves or clothes closet is the mother lode of direct marketing—and it’s what makes Internet retailing so promising. Some of the most visited e-retailers, such as Amazon, CDnow and Lands’ End, were built on the foundation of knowing their customers’ search patterns and interests better than physical stores and catalogers.
But personalization has its detractors, and one of them is suspicion. Some consumers are shocked to learn that any information is gathered about them at all. Others are already on their guard, convinced that every click is being recorded. Because so much online activity can be tracked, the privacy controversy is always at issue.
Amazon, through its acquisition of Alexa Internet and its use of the company’s zBubbles comparison shopping tool, also has entered the privacy fray. Five class-action suits allege that Alexa collects more information from its users than company executives have acknowledged. Alexa says zBubbles collects Web traffic and usage data anony-mously, but plaintiffs claim the service tracks full Web addresses and query strings that might include names, addresses and other personal information.
Most Web retailers are relying on their privacy policies to promote consumer trust. A report released by Enonymous.com, a company that rates privacy policies and hosts privacy and personalization applications, shows that nearly two-thirds of the top 1,000 Web sites post a privacy policy, compared with the FTC’s 1998 survey of 1,400 sites, which found only 2% did.
Personalization first
If you’re a cookie disabler, don’t bother shopping at Beautyjungle.com, according to the company’s privacy policy. “Our system is a little rigid,” concedes Lars Kry, vice president of marketing. “We haven’t had any complaints about it that I am aware of, but I think people who are opposed to the policy choose not to shop on our site.”
Kry says Beautyjungle puts a heavy focus on personal-ization to help distinguish itself in the crowded cosmetics category and assigns cookies to compile customer profiles. To coax customers to hand over the information, Beautyjungle runs sweepstakes that can pay out a prize of $22,000 in cash and gift certificates for up to $500. Customers who enter must fill out a beauty profile first. Kry says this allows the company to understand its customers and to better cross-sell and recommend products based on hair, eye and skin color.
“Cookies are extremely important for this process because they enable us to personalize the shopping experience for the consumer,” he explains. “But how you use that information is a different question—perhaps an ethical one. I don’t think Beautyjungle is violating privacy rights by the way we use customer information today.”
Kry also emphasizes the company won’t sell its data to anyone. “We are adamant about that,” he says. “It is very important that in the long run we build trust with our customers, and that transcends everything we do.” But Beautyjungle’s privacy policy, which is buried deep at the bottom of the site’s home page and easy to miss, says something different. While explaining what customer information is gathered and used for, the policy says aggregate customer information may be released to “reputable third-party vendors.” It also goes on to say that currently Beautyjungle does not “sell, trade, give away or rent your personal information to others. We may decide to do so with trusted third-party partners in the future.”
Kry says the site’s customers haven’t shown tremendous concern over privacy, but he acknowledges that even one concern is too many. “We have to keep asking ourselves are we doing enough?”
CDnow waits it out
Despite the recent surge of privacy concerns, CDnow executives say they’ll wait and see where the issue goes before considering changes to their current policy and how it is displayed. According to CDnow executives, the controversies at DoubleClick and Amazon had little spill over to their customers. And without such an uptick in calls or e-mails, the site has no plans to review its policy or display it more prominently.
Like Beautyjungle’s policy, CDnow’s is accessible via a link dis-played at the bottom of the home page. The policy itself runs only five paragraphs, but clearly maintains that the company will not rent or sell cust-omer information without permission. Like other sites, CDnow shares aggregated information to third-parties, but the policy does not go into detail.
As for tracking where its customers go on the site, CDnow is selective about doling out cookies, says Russ Cherry, the site’s vice president of Internet technology. Customers who register for an automatic log-in are assigned a cookie, but they can shop freely on the site if they disable the function. Only customers who have opted-in for special offers and promotions receive any type of personalization or recommendations. “As far as our marketing campaigns and the segmentation we do offer our customer base, we get that off the preferences and the e-mail programs that customers sign up for,” Cherry explains. “The only additional thing we do is that customers are able to identify their favorite artists and that can be used as part of our segment-ation criteria for e-mail campaigns. But it is all information that customers have actively given us.”
Despite the emphasis on privacy policies, many sites don’t post one at all—a whopping 77% of 30,000 well-trafficked sites, says Enonymous.com. According to the Personalization Consortium, an international advocacy group that promote responsible one-to-one marketing on the Web, 58% of Web users require a privacy statement before sharing information and 51% read the privacy statement before registering on a site.
Michele Slack, analyst with Jupiter Communications, contends that few consumers bother to read privacy policies. Plus, it takes more than a good policy to persuade consumers to give up personal information. “Consumers aren’t used to being tracked, and they don’t like it,” Slack says. “For the most part, when you buy something in a physical store, nobody is tracking you. Nobody is watching to see what you buy. There is no record tying you to the purchase you make.”
What retailers can do she says, is offer some value to customers in return, such as customized welcome messages, access to members-only areas, content designed especially for them, information about site events and developments, and targeted advertising. The important thing, experts agree, is to show consumers they are truly getting a benefit from the information they provide.
Browsers, never buyers
If retailers don’t address the privacy issue, Slack and others maintain, consumers who only research products online will never become buyers.
Various federal lawmakers are taking action by introducing a slew of privacy bills that would regulate the use of personal inform-ation, data profile appending and assigning of cookies. For example, Rep. Bruce Vento (D-MN) is sponsoring HR 313, the Consumer Internet Privacy Protection Act of 1999, which would give the FTC investigative and enforcement authority and would prohibit commercial Web sites from disclosing personally identifiable information without written consent.
Web companies argue that such regulation would strangle the entre-preneurial spirit of the Internet. “The thing that makes the Internet so dynamic, so exciting and the ultimate in fair marketplace is this non-regulated aspect,” says Beautyjungle’s Kry. “But on the other hand, the potential for abuse is there. Maybe there should some minimum regulation to protect the consumer from any abuses that might occur.”
Until there are clear universal policies, others are left to question the ability of the Web to be self-regulating. “Because of the amount of information that is available and the amount of publicity from the media that surrounds the Internet, we have smarter consumers than we have ever seen,” says YOUpowered’s Lowell. “So their fear of what happens with their information on the Web will start a movement toward self regulation. If a retailer isn’t respecting its customers privacy, their competitor will.” 
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