Every industry has its PR nightmares. For online companies, where collecting customer data means big-time ad dollars, it’s the issue of privacy that goes bump in the night.
Every industry has its PR nightmares. For online companies, where
collecting customer data means big-time ad dollars, it’s the issue of
privacy that goes bump in the night.
New laws and aggressive campaigns by privacy advocates are forcing
e-tailers and service providers to take a hard look at the data they
collect on users - and how they collect it.
For example, RealNetworks drew fire last fall from a pair of
class-action lawsuits representing 13 million consumers who downloaded
the RealJukebox music software. One suit seeks dollars 500 million in
damages, claiming the software tracked users’ music preferences -
including the CDs they listened to on their computer - and secretly
reported this information back to RealNetworks.
Called ’E.T.s,’ because they ’phone home’ data on users, such software
add-ons have been around for years, but now they’re becoming media cover
stories (see the July issue of Time-Digital). While hundreds of
shareware programs such as PKzip and Free Solitaire contain similar
E.T.s, and despite the fact that RealNetworks quickly deactivating the
data-tracking feature, the lawsuits - the largest yet in scope - have
become a litmus test for future privacy laws.
A privacy lesson of a different kind was learned by Toysmart.com this
summer when it became the first company charged with violating the new
Children’s Online Privacy Protection Act (COPPA). In an attempt to raise
capital, the now-bankrupt e-tailer put up for auction its marketing
database, which included information on children under the age of 13 -
something strictly outlawed by COPPA. In addition, Toysmart’s Web site
stated data would never be disclosed, resulting in a separate charge of
The data dilemma
’Customer data collected under a privacy agreement should not be
auctioned off to the highest bidder,’ says Jodie Bernstein, director of
the Federal Trade Commission’s Bureau of Consumer Protection, the agency
filing the charges. Toysmart agreed to delete records on users under the
age of 13 and give adult customers the choice to have their data
removed, a practice called ’opting-out.’
Once underestimated, privacy advocates are now well organized and media
savvy, and have their sights set on big targets. Richard Smith, noted
for tracking down the Melissa virus, is credited with cracking the
RealJukebox case and recently filed a similar E.T. complaint against
Amazon subsidiary Alexa and its zBubbles online shopping software.
Another credible advocate is Marc Rotenberg, executive director of the
Electronic Privacy Information Center (EPIC). Rotenberg has testified
numerous times before the Senate Commerce Committee, and his summer
media campaign was instrumental in halting plans of online advertiser
DoubleClick to link user profiles with names and addresses from recently
acquired Abacus Direct, a direct mail company.
’(DoubleClick) is now the subject of scrutiny by the FTC and state
attorneys general, including Michigan and New York,’ announced Rotenberg
in a June press release.
The watchdogs’ tactics of turning privacy issues into headlines seems to
be working. PC World now dedicates an annual issue to online privacy,
and stories involving ethically borderline practices by Internet
companies have been featured in Time, Newsweek and US News & World
Despite the mostly negative press coverage of privacy, some e-businesses
have masterfully created a privacy-sensitive image using consumer
education and up-front data collection notices.
’Businesses should inform consumers in a clear, conspicuous manner how
they treat personal information and give choices on how that information
is used,’ warns Senator John McCain (R-AZ), chairman of the Commerce
Taking heed, the Big Three - AOL, Yahoo! and Microsoft - all advertise
clear and protective privacy policies.
AOL, facing competition from free Internet services, used recent print
and broadcast campaigns to promote its commitment to user privacy. AOL’s
privacy pages have links to ad partners with instructions on
Yahoo!’s privacy Web page does much the same and includes an education
section with (surprisingly) a link to the Federal Trade Commission. ’We
at Yahoo! are committed to ensuring users are empowered to make informed
choices about protecting their privacy,’ said co-founder Jerry Yang last
year when the company unveiled its program.
Even Microsoft, once vilified by accusations of inventing E.T. programs
five years ago, is changing its privacy image. ’The debate over privacy
has been settled at Microsoft,’ says Richard Purcell, the company’s
director of corporate privacy. ’There is no debate. Empowering our
customers is a solid business decision and a fundamental value to
creating customer loyalty.’
Three years ago, in a bold yet unheralded move, Purcell and his team at
Microsoft.com implemented the Profile Center, where users can view the
data Microsoft.com has collected about them and make specific
corrections or deletions.
Going beyond just policy, the company has also integrated privacy into
its software line, announcing two new products: a robust privacy manager
upgrade for Internet Explorer users and the Privacy Wizard software
already used by over 17,000 Web sites to generate customized privacy
While advocates, legislators and advertisers try to predict the complex
future of online privacy, today’s bottom-line equation is fairly
Those Internet companies working to turn the ’privacy problem’ into a
marketing asset will find success. Dot-coms ignoring the legal dangers
and public perception importance of online privacy simply won’t.
In a Business Week/Harris poll published in March 2000, 92% of Net users
expressed discomfort about Web sites sharing personal information with
The newly amended Computer Fraud and Abuse Act allows consumers to sue
for financial redress companies that use deceptive practices According
to a July 2000 cover story in Time-Digital, an estimated 22 million
users are believed to have unknowingly downloaded E.T.-type programs The
words ’right to privacy’ do not appear anywhere in the Constitution. The
referred-to 4th Amendment right comes from a collection of Supreme Court
rulings that apply to the search-and-seizure actions of the government
against US citizens.