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Privacy Self-regulation Goes "Poof"
A March 16 Forrester Brief:
source: www.forrester.com
Online marketers' hopes of avoiding government restrictions on data
collection have been dashed. Waves of legal actions, negative publicity,
and regulatory inquiry swamping DoubleClick signal the start of virtual
world dreams clashing with physical world realities.
DoubleClick pulled back from combining consumer surfing-pattern data
with offline purchase data from its ABACUS subsidiary after its plan
touched off a media wildfire. Unable to contain escalating criticism,
and with President Clinton calling for stronger privacy protection for
computer users, DoubleClick asked the government to clarify online data
rules. The past month has exposed the holes in self-regulation.
Data leaks have been overlooked. Privacy advocate Richard Smith showed
that financial data and video titles -- both information types which are
regulated offline -- are often inadvertently sent to third-party ad
servers within the line of code that requests delivery of an ad. To stop
the leaks, Intuit changed the programming of its pages and Kozmo
cancelled its DoubleClick contract earlier than planned.
Marketers offer opt-out -- if consumers can find it. For two years,
DoubleClick has allowed consumers to refuse the cookie that tracks their
surfing patterns, but the opt-out page was hard to find. DoubleClick's
offer to promote the page with 50 million banners failed to satisfy
regulators or privacy advocates.
Online marketers blindly follow offline practices. Traditional direct
marketers routinely combine data from motor vehicle records, catalogue
purchases, warranty card surveys, and other sources. But while costs and
technical difficulties impose limits on merging offline databases,
online data collection is automated. DoubleClick has compiled 100
terabytes of data on 100 million Web users' habits.
SELF-REGULATION WAS A FANTASY
Resolving clashes between the Internet and physical world calls for
Web-aware public policies.
Legal principles, not technology, will decide the issue. Delineations
between public and private spaces underlie privacy law. It is legal to
hire a private eye to follow someone at a shopping mall, but it is
illegal to tap a phone. Only legislation can define whether a Web user
deserves privacy because she is in her living room or should expect to
be tracked because the Web is on a public network.
Old laws need updating. Thirty-year-old laws such as the 1971 Fair
Credit Reporting Act protect individuals' financial information from
offline marketers. Without a provision applying to online information,
marketers will exploit this loophole in the name of giving consumers the
"benefit" of more targeted ads.
New laws must curb new intrusions. The Web gives marketers unprecedented
direct contact with children. In 1998, Congress enacted the Children's
Online Privacy Protection Act to limit marketers' ability to gather
information from children. Similarly, combining online and offline data
raises new issues which need government intervention to resolve.
THE SKY IS NOT FALLING
Privacy is important but doesn't signal a death knell for online
advertising if marketers:
Purge suspect data. As an act of good faith, ad networks should erase
any financial, medical, or personally identifiable information
inadvertently captured in referring URLs. Sites should follow Intuit's
lead and plug data leaks on their site.
Engage in the public debate. This spring's Advisory Committee hearings
and sweep of privacy policies will likely evolve into an FTC proposal to
Congress this fall. Organizations such as the Direct Marketing
Association that try to spin the debate into an issue of business' right
of free speech breed mistrust and invite stiffer regulations. Rather
than fight a losing battle, marketers should accept that privacy
concerns are legitimate and help craft the rules.
Befriend the regulators. The FTC is reluctant to issue rules without a
deep understanding of the technology. Online marketers should cooperate
with the agency so they have an educated ally to counter politicians
posturing as champions of individual rights in an election year.
************************************************
Lisa Potter
School of Information and Library Science
University of North Carolina-Chapel Hill
Chapel Hill, NC 27599