Profits versus privacy. Here's an analogy bound to ruffle some feathers: illegal drugs. The costs are so low, the potential returns so high, the competition so intense, and the regulation so minimal, that the sellers don't care if they upset people.
With considerable fanfare, at least two corporate-sponsored groups have sprung up over the last year to reassure consumers and an increasingly edgy Congress that Internet users have nothing to fear from corporations sending out mass emailings and assembling vast databases and usage data about their customers and prospects.
One of these groups is TRUSTe. It provides a privacy seal of approval to companies that are judged to properly disclose their privacy policies, but it makes no judgments about the actual policies. Among the participating companies are AltaVista, America Online, Microsoft, and Yahoo
Another group is the Privacy Leadership Initiative. It sponsored a study suggesting that most Americans have serious doubts about the privacy practices of corporations; the group’s intent was apparently to show its openness and declare its commitment to reversing that trend. Its backers include IBM, Procter & Gamble, Ford Motor Co., and E*TRADE.
A Clash of Interests
Can corporate America succeed in countering the mounting concerns about the growing assortment of data-related abuses on the Internet — spamming, trading in email lists, using cross-site tracking to better pitch ads, and other infringements of privacy?
Another question should be asked first, though: Does corporate America really want to protect Americans’ Internet privacy?
Many corporations have no interest in protecting privacy, at least for now. Maybe if one or another gets burned by a big scandal or the government threatens serious restrictions, that attitude might change. But for now, some corporations have so much to gain from compromising privacy that it is nearly impossible for them to turn their backs on the vast potential profits. It would be like asking manufacturers during the 1800s and most of the last century to voluntarily not dispose of chemical waste in rivers and streams and instead spend significant money to cart the materials off.
In the meantime, corporate America can try to turn around public opinion, but I suspect most Americans will see these efforts for what they are: propaganda campaigns designed to stave off legislation for as long as possible.
The Lessons of Experience
How do I know this? My Internet marketing agency, Circle.com, last year encouraged corporate conformity with a tightly conceived privacy policy designed to eliminate spamming. We surveyed several corporations planning significant email campaigns, inquiring about their willingness to send a confirmation email to every person on their email lists at least once a year, to clean up their lists so they’d get rid of old addresses and names of individuals no longer interested in hearing from the companies. Our rationale was that the companies would stop offending people who no longer wished to receive unwanted emails, and in the process the companies would develop lists that were more productive in generating sales.
Some of these lists include hundreds of thousands of individuals. Companies assemble them to alert people on the list about special offers and send regular email newsletters to reinforce a corporation’s brand.
The reactions of a sampling of corporations (including clients and prospects) were decidedly negative. Their rationale? Email is so easy and cheap to send that eliminating names would likely be more costly than keeping them. In other words, even if only a few people from among those individuals who might not otherwise have agreed to stay on a list decide at some point to make a purchase, the companies will make money.
Profits’ Primacy
That’s the reason I still receive email newsletters from Apple Computer with news about Macintosh computers, even though it’s probably been three or four years since I signed up for the list and I haven’t had a Macintosh computer in two years.
And that’s why late last year eBay told thousands of users that they would receive email marketing materials unless they respond negatively — although they had already done so. Apparently, these users, who had registered at the site between April and November of 2000, hadn’t unchecked the default “no” to the question asking them if they want to receive information from marketers. So what’s the problem? The default “no” had been an error, eBay said. The default should have been “yes.”
When caught in such a situation, executives often resort to rationalizations. But Scott McNealy, chairman and CEO of Sun, in a moment of unusual candor in early 1999, was quoted telling a group of reporters who quizzed him about privacy concerns, “You have zero privacy anyway… Get over it!”
It’s a situation that can only be compared to illegal drugs. The costs are so low, the potential returns so high, the competition so intense, and the regulation so minimal, that the sellers don’t care if they upset some people — even lots of people. They just know what the numbers tell them, and up until now the numbers have been saying to corporations that it pays to play it fast and loose with consumer data.
So here’s a prediction: Congress will begin stepping in with increasingly restrictive regulations about what companies can and can’t do in the email and data-gathering areas, and companies will complain to high heaven about heavy-handed government interference in free enterprise. Isn’t that the way it always turns out?
