From
the NY Times:
“Should these companies be able to sell or use what’s essentially private data without permission? The easy answer is absolutely not,” said the assemblyman who sponsored the bill, Richard L. Brodsky, a Democrat who has represented part of Westchester County since 1982.
As an online marketer in Australia, my concerns turn quickly to the tools of my trade, and how this legislation may affect the growth of Australia's Internet marketplace.
Site MembershipNearly every ecommerce site offers some sort of membership option. That's really not what's at issue here.
eCommerce sites offer membership to keep in contact with their customers: to offer specials, personalize and socialize, and to build traffic to their websites. More than anything else, membership allows the company and consumer to build a business relationship.
For the vast majority of businesses on the Web, -and especially businesses that are only online-, it's only realistic. Except for established brands such as Proctor and Gamble, Johnson and Johnson, Google, and Yahoo, membership is an acknowledgment of an oft-forgotten fact of doing business on the Web: the Web is a direct marketing medium. There is an old business homily that it costs 6 times as much to find a new customer as it does to retain an old one. Staying in contact with your customers helps you build your own brand.
Most businesses on the Web don't sell or share their customers' information, but it's worth checking their Terms and Conditions to be sure.
It's an important distinction.
For the website owner, membership is a means to document their customer base. It adds to the value of the online business. The owners respect their customers' privacy because it is part of the business relationship.
Sharing or Selling InformationThe legislation is aimed at those sites that sell, use or share consumer information without informing the consumer. It will require websites to offer consumers obvious ways to opt out of advertising based on their browsing history and Web actions. Users would also have to give explicit permission to companies like Google, Yahoo, and AOL to link the anonymous searching and surfing data from around the Web to information like their name, address or phone number. First blush, that sounds like a good idea. The question is how is the consumer better served?
There is a loss of privacy in responding to any advertising. Consumers are already aware of that fact. It's not news.
Google, Yahoo, and AOL offer services which allow advertisers to better target the interests of consumers. That's arguably a win-win situation for all concerned.
- Consumers get more relevant information when they search on a service or product.
- Advertisers spend fewer advertising dollars to find interested consumers. Less money spent on advertising can mean lower prices to the consumer.
- And the service provider (Google, Yahoo, AOL, etc.) makes money selling the targeting service.
- Compared to the costs of targeted conventional advertising, these services are inexpensive and efficient. The lower costs mean smaller companies can compete for the consumer dollar, which keeps larger companies' pricing lower.
Opt-out vs Opt-inDavid Hallerman, a senior analyst at eMarketer points out:
"While transparency about marketer intent will lead some portion of consumers to opt-out, those who say 'yes' will be more valuable, since their willingness to trade Web site tracking in exchange for more relevant ads will clearly signal their preference."
The genie may already be out of the bottle. Data collection by online ad companies is already widespread. Consumers and advertisers have come to expect Web companies to produce ads based on copious consumer data, and all have come to expect the level of service and responsiveness tracking allows.
Most web companies oppose any legislation which appears regressive in this sense. Interestingly, Microsoft favors legislation about online privacy and advertising practices. Microsoft has lobbied federal lawmakers to establish regulations include all sorts of companies that serve ads around the Web, not just those that show ads based on users’ behavior.
It's sad to say, but this is Microsoft again taking a side against entrepreneurism and new business, and in support of monopoly practices. Microsoft has been
under fire many times for intrusive marketing that abuses customer information.
Opt-in ListsThere are numerous Opt-in newsletters and email lists across the Web. In exchange for valuable information, games or contests, consumers are requested to provide contact information and requested to indicate their areas of interest. Some of these surveys are internal marketing research. More commonly the information is sold to email list vendors, who in turn offer the interest-based lists to businesses to market their products and services.
For businesses, these lists are invaluable but not cheap. At one time, email lists were the most efficient means of marketing on the Web - providing approximately a 14% click-thru rate (CTR). Arguably, SEO has supplanted email lists as the most efficient use of advertising dollars.
Since the purpose of the lists are transparent in the Terms of Use, this legislation doesn't seem to affect Opt-in lists.
CompromiseThere is no question that business will intrude beyond the boundaries of the expectation of privacy, if allowed. Consumers have a right to privacy. The question that will remain moot is to what degree each of these principles will apply. Ideas and perceptions change quickly.
Billboards and neon signs were once seen as intrusions on privacy. The signs are intrusive, but they don't report back. CCTV cameras are all over the UK. Cameras do report back. But they add to the perception of safety and security. Most UK residents have become accustomed to CCTV in a relatively short time.
On a personal level, do I have the right to tell my neighbor not to install a CCTV security system if s/he can see into my yard? - or did my neighbor just increase my own security?
In a complex society, there are always compromises to be made.
Advertising proponents argue that no harm has been shown by behavioral targeting or third-party advertising. That idea is worth investigating further. The idea is hardly proven at this point. Advertisers speak to their own self interest when they say the rush to regulate the Internet is really unnecessary.
The Web has changed. It has become a medium for business in order to fund itself. Online advertising is the fuel that drives Internet business. If the fuel dries up, the engine stops.
Privacy and the LawLegislators and the legal system are given the power to curtail human and civil rights as part of the social contract of government. That social contract presupposes that these laws will conform to the 'common weal' of the people. Laws which blatantly disregard the common weal, such as the Howard government's AWA laws, can result in a change of government and the law.
If services such as Google, Yahoo, and AOL are transparent about their use of search tracking in their Terms of Use, does the responsibility rest with the consumer? -or at what point do these actions call into play the role of government to protect its citizens?
Google alone represents about 80% of the searches from Australia. That speaks either to the quality of their service, or indicates a huge threat to Australian society. If that threat is real, then how real is the threat from social networking sites? -and, for that matter, government tracking through filtering?
Internationalism and AustraliaAlthough this legislation is proposed in New York state, it will affect the way business is done on the Web throughout the world.
Australia has struggled to come to terms with its own Privacy Act and Copyright laws revisions. The recent revisions to Copyright Law forced Google to threaten publicly to
remove all Australian sites from its indexes. Australia was compared to Communist China over filtering and the reporting requirements for ISPs. Over 150 exemptions to the revision quickly followed.
How these issues will shake out remains to be seen. Legal scholars have not come to terms with changing business models on the Web.
Under the Howard government, an Internet-phobic attitude affected the perceptions and use of the Web.
Australia represents a good study in how a developing legal system deals with the forces of an information economy. If the laws are based on archaic reasoning, or influenced too heavily by cashed-up special interests (as in the case of the Australian copyright revisions), the effects spread much wider than the national jurisdiction.
Social Networking sitesPerhaps the most influential marketing force in Australia today are the social networking sites. Facebook, MySpace, LinkedIn, and YouTube are in the news daily. These sites present prescient privacy issues since so much individual information is put there by users.
How can a law prevent advertisers from collecting data based on the use of their services if so much information is available on
social networking sites? Will social networking be curtailed by this legislation? It could be. That would raise an immense furor that will not help the reasonable debate on privacy.
Kim Weatherall at LawFont:
Meanwhile, over at MySpace, it has emerged that over 29,000 registered sex offenders have profiles on the website, which is four times as many cited by the company only two months ago. (The total number of MySpace users numbers around 180 million.)
The idea of registered sex offenders interacting on MySpace is of course worrying, given that your online persona may be very different from your real one.
But also giving pause is the fact that MySpace was pressured to release this information in response to the demands of a group of attorneys general, as well as the fact that MySpace has already, without the involvement of government, used its own database on users to remove about 7,000 profiles of sex offenders. I do not mean to treat the issue of sex offenders lightly — but it does call into question the roles of industry, the government, and regulation in the world of social networking.(emphasis added)
The driving force of the legislation in New York is a straw man argument. The straw figure is constructed, as usual, of shallow reasoning and fear. There are legitimate concerns, but real legislative leadership and understanding is necessary before legislation is tabled. Good law is not driven by anecdotal evidence. It is based on reality.
These are not simple issues, and they will not be resolved quickly. But it is important to distinguish the legal and socially acceptable marketing practices from those in question - without presuming that because something is questioned it is wrong, or should be made illegal.
Addendum: Recent events speak to these issues. Soon to come.
SEO/SEM in Australia is a special issue for so many reasons. Join me was we explore. It will be a fascinating and informative journey.
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Image via WikipediaI've got to admit to a bias towards small business. I want to see small business be as effective at using the Net as "the Big Boys."
