November 12 2010
by Thanasis Delistathis

Privacy vs. Relevance (or Convenience): a tricky balance

According to today’s Wall Street Journal (WSJ), the Obama administration is taking steps to regulate privacy practices on the internet.  That might include new laws and a new regulatory position.  While Europe has always been more aggressive in this area, the U.S. government has largely left it unregulated, lest it might impede innovation.

The WSJ has published a series of articles in the last few months analyzing the data sharing practices of major web publishers.  They discovered that dozens of companies on each website are planting tracking cookies to follow the users.  Also, the level of sophistication has increased dramatically.   For some more stories about the activity in this area look here.

My first reaction was that this is awful and should be stopped.  Then, today I looked at those ads on the right hand of my facebook page.  And you know what? I noticed that they are getting more relevant.  Some of them are actually things I was tempted to click on.  And some of the sites I visit serve me information more suited to my interests.  And it struck me: that is the tradeoff to privacy.

The public policy challenge I think is going to be how to strike that balance.  Getting this wrong could have big implications for the growth of the internet, which depends on an increasing share of the advertising spend across all media.  No ability to target ads?  Lower ad rates, harder to close the famous revenue gap estimate from Morgan Stanley below.

The other side of the relevance coin is convenience.  Think about next time you use your facebook credentials to log into another site without having to create a new account.  You just saved youself the effort of creating a new account with a new password to remember.  Pretty convenient.  You also just allowed facebook to pass some of your info to that new site.  I really hope that any new rules would be flexible enough in order to allow innovation but also provide safeguards to consumers.  I think they need to set a framework to provide transparency, disclosure and choice to consumers, but not create a sclerotic mandate that impedes growth.

Just to remember how far we have come in the last 15 years, here is a link I recently found with a Steve Case interview circa 1995:

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