Do Consumers Care About Online Privacy?

Critics Say People Don't Understand Data-Gathering, Ad-Targeting Schemes

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NEW YORK ( -- As the Federal Trade Commission meets this week to discuss internet privacy and whether the proper controls are in place, the issue sports one glaring question mark: Do consumers really care?

When asked whether they care about privacy, consumers will almost always say yes, but internet privacy and data collection, unlike childhood obesity or pharmaceutical ads, has yet to become a consumer hot-button issue with real ramifications for marketers and media sellers. Even privacy advocates admit there's not as much consumer outcry as there could -- or should -- be.

Ahead of consumer outcry
"I think this is a bit ahead of the real consumer outcry," said Colin O'Malley, director of strategic business for TRUSTe, a nonprofit privacy organization that outlines acceptable practices and certifies online business. Advertisers, not only consumers, usually become more interested in the topic after a privacy matter gets a lot of attention and is embarrassing for marketers, Mr. O'Malley said.

Privacy advocates contend that the time for government to protect privacy is before, not after privacy violations take place, infuriating consumers and sparking outcry. But even that outcry might be hard to come by. In the wake of AOL's release of search data a year ago (that data was not explicit, but it could have been used to implicitly retrieve identifiable information by looking at a user's search log terms) consumers didn't seem overly concerned and it was left to advocates and activist bloggers to make a stink.

But it appears consumers can't be bothered even by serious infractions. Advocates suggest consumers would care more about privacy if they understood data-gathering better. Some advocates hinted that "bombshell" revelations about data-gathering tactics will be revealed this week that could wake a public that has appeared largely unaffected by sophisticated online ad-targeting schemes.

Behavioral targeting
Much of the focus of the workshop will be on behavioral targeting, a tactic in which an ad seller can segment consumers into various behavior categories by following their online surfing behavior across multiple sites. For example, a consumer who looks at hybrid vehicles on an auto site can be tagged as such and targeted with a Prius ad as he reads the local newspaper online.

Such targeting is often not malicious and, in fact, can be essential to the economics of creating quality digital content. Behavioral targeting "helps support free content, and it's growing fast," said Reed Freeman, a partner in Kelley Drye Shannon Collier's Advertising and Marketing Practice Group. "It's almost always -- if not always -- done anonymously." It also helps serve more relevant advertising to consumers, which studies prove are more effective and, often, more palatable.

Still, privacy advocates think consumers need to be more aware that they're being tracked and given more transparency into and control over the process.

Kathryn Montgomery, a professor of communications at American University who was almost single-handedly responsible for Congress passing the Children's Online Privacy Protection legislation, said experience demonstrates that consumers care greatly about privacy issues and will react. She said what is happening now is that they don't yet understand the targeting taking place.

Understanding the 'apparatus'
"It's happened so quickly, that the public doesn't know and people don't understand the way the apparatus works," she said, adding that consumers are beginning to see the implications: "You can go to a library and look up a medical issue in private, but you do the same thing online and the search is tracked and follows you."

The workshop will also take a look at marketers' privacy policies, as many advocates don't think consumer notification about how personal data may be used, as it exists today, is sufficient.

"Consumers fundamentally misunderstand the rules of the marketplace," said Chris Hoofnagle, senior staff attorney at the Samuelson Clinic at UC-Berkley's Boalt School of Law, addressing a perceived apathy toward the subject. He cites studies in which up to 75% of consumers think as long as a site has a privacy policy it means it won't share data with third parties. "They equate the presence of the policy with substantive privacy rules."

The FTC's two-day workshop comes as the agency readies to act on Google's $3.1 billion bid for DoubleClick. Several sources suggest that approval could come as soon as next month, though it's still unclear if the agency will impose any conditions on approval. Final completion of the acquisition may await the European Union's own deal review.

FTC Commissioner Jon Leibowitz, who is scheduled to speak at the workshop, said the extent of deal activity in the digital area and the possibilities for targeting makes the FTC want to take a closer view of what is brewing in the space.

"Clearly it's a white-hot area, where there are a bunch of deals going in a much more granular area for advertising," he said. "I want a lot more in depth understanding of the issues than the heated rhetoric on the extremes of the debate."
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