Commentary Addressing Risks and Opportunities Through the Lifecycle of Data, Technology, Advertising and Innovation

Data Counsel

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“Information wants to be free” has been a rallying cry of technology activists from the inception of the Internet revolution. True to this slogan, web sites offering free web content and free web services are the most pervasive and popular sites on the Internet.

But, to quote another adage that predates the Internet: “There is no such thing as a free lunch.” The providers of these “free” websites are extracting something of value from consumers in exchange for the “free” content and services. These websites are collecting information about individual consumers’ identity, interests and habits -- valuable information that can be sold to advertisers looking to target individuals matching the profile of their desired consumers.

In its recently issued <a href="http://www.ftc.gov/os/2012/03/120326privacyreport.pdf">Report</a> detailing its recommendations for protecting consumer privacy, the FTC made a priority of empowering Internet users to prevent websites from tracking user activity across the Internet. Adopting a slogan of its own – Do Not Track – the FTC has called upon industry groups to implement an “easy-to use, persistent, and effective” system that will allow consumers to block the tracking of user activity across the Internet. The not so veiled threat from the FTC is that if industry refuses to act, government regulators will have to step in and impose a “Do Not Track” regime.

Assuming that the FTC achieves its stated goals--to clearly warn consumers whenever their Internet activity is tracked, and to empower those consumers to block that tracking immediately, what are the potential commercial implications?

One scenario is that there will be no implications. For example, web browsers have long given consumers the ability to disable cookies. But any consumer activating that web browser feature quickly learns that he or she has access to almost no web sites because virtually every interactive web site relies on cookies. If consumers are routinely denied access to desired web sites when they block “tracking”, consumers will quickly be taught not to block tracking.

Another scenario is possible as well. To date, “paid for” web services have generally found it difficult to compete with “free” web services. Why pay for something that you can get for “free”? However as outlined above, “free” services are not really free. There is a price paid in terms of privacy sacrificed. To date, that price has been hidden in lengthy privacy policies that must be accessed through a link at the bottom on the home page. If that cost is made clear though “persistent” and highly visible warnings to consumers, then some (but not all) consumers may conclude that the price they are paying in terms of privacy sacrificed is too high. They may look for an alternative. And if the market responds by offering web services that are paid for with cash but not with a disclosure of private information, some consumers may choose that option, and the “paid for” web service model may have increased viability.

FTC’s “Do Not Track” Initiative Could Create New Market for “Paid For” Internet Content