Privacy vs. Profit: The Emerging Privacy Economy

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It wasn't that long ago that the proprietor of the local general store provided personalized service to his customers by interacting with them and knowing their needs. He could do this because he was part of the community. He heard about their lives because he chatted with them and with their neighbors. He got to do this because he had their trust and in turn took care of their needs. What he didn't do was follow them around from store to store peeking in the windows to see what else they were doing. For modern marketers, this practice is becoming an integral part of their communication strategy.

Technology makes it easy for us to track consumers online in order to make more relevant offers or to cleverly nudge them to complete a purchase they abandoned on another web page. However, there is a fine line between sending targeted offers and just plain creeping people out.

Few consumers realize the places they visit on the web can remember what items they looked at on their site, the search terms they used to find the item, and what items they compared it to. Fewer still know that via cookies, marketers can track all the sites they visit, and serve up ads to them across the web, based on browsing activity. So how do you use data in a way that helps bring the customer back but doesn't come across like a George Orwell book?

For me, there are a few key guidelines:

1. Be transparent. Recent data breaches have brought privacy concerns to front of mind for many. Don't put the burden on the user to investigate how their data is used. Tell users what information you are collecting and how you are collecting it. Disclose that you work with third-party vendors if applicable. Use language the average person can understand, not legalese.
2. Provide options. Don't be afraid to give users control over how much personal information they share. Provide options for them to manage that information and explain how you use and share the data you collect.
3. Show the value to the consumer. Don't make it all about you. Show how you can provide a better, more personalized experience through behavioral targeting. When faced with the prospect of totally irrelevant advertising, most people feel sharing some personal information is a fair trade.

Paradoxically, it seems the answer to how to handle the role of technology in monitoring online behavior may be more technology. Start-ups like Personal and Singly aim to let Internet users aggregate and control what specific data is shared and what isn't. While these companies may never gain wide visibility, the very fact of their existence should act as advance warning to smart marketers. Those that can show honesty and transparency and build trust with their customers now will come out ahead in the evolving "privacy economy."