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Privacy trends collide

Yahoo! is the latest to turn users away for the sake of cash.

Two trends related to privacy are on a collision course. The first trend comes from citizens who want more privacy from telemarketers. The Federal Trade Commission and several members of Congress are trying to introduce a national do-not-call list. According to the Wall Street Journal this past week, members of Congress are getting very strong constituent support for legislation in support of the FTC’s proposal. The implication is that consumers are tired of all the telemarketing intrusions into their lives. If citizens put themselves on the list, companies who solicit to them over the phone will be subject to $11,000 in fines per call. The list would effectively shut down the telemarketing industry.

The second trend comes from Web companies, which are stepping up their efforts to rent or sell user phone and address information for the purpose of direct marketing. When Yahoo! changed its privacy policies midstream, it followed Excite and Terra Lycos with more liberal polices. It’s part of a general trend in large portals to try to squeeze as much revenue out of users as possible. Yahoo! was not going to survive the year unless it started selling all the information it has gathered on its users. It may be forced to change back, given the fact that users will simply opt out of the direct marketing and choose other sites with more consumer-friendly privacy policies. Sites faced with a cash crunch have to strike a balance between more revenue and more users. Yahoo! may find that it loses more revenue through lost traffic than it gains in revenue from direct marketing partners. This will be especially true when the national do-not-call list is implemented. If there’s no revenue in telemarketing, Yahoo! will have sold its users away for a dried-up revenue stream and will not be able to get them back.

A couple of other trends will have an impact on the shifting privacy landscape as well. One is that TRUSTe–the privacy certification company–is showing its lack of teeth by granting Yahoo! its “trustmark” even after Yahoo substantially changed its privacy policy. Esther Dyson, one of the founders of TRUSTe, has been widely critical of her former brainchild, stating that it has changed from consumer advocate to corporate apologist. Fran Maier, TRUSTe executive director, has countered Dyson’s claims by stating in published reports, “I can’t tell you all the things [Yahoo!] wanted to do, but believe me, we were there.” In other words, Yahoo! had to scale back the gutting of its own privacy policy in order to maintain the TRUSTe trustmark. This is just another way to say that Yahoo! outnegotiated TRUSTe by proposing absurd standards and settling for less absurd policies. The result is the same: TRUSTe has discredited itself again by letting a site violate the letter and spirit of its trustmark and still retain the mark. The result is, users will no longer trust the trustmark, and it will be of no value to sites, however clean their privacy policies might be.

Lastly, as I reported in our magazine this month, P3P will only amplify the overarching trend toward a democratic Web by giving users the ability to choose the sites they visit based on their privacy policies. One of the reasons for TRUSTe was that privacy policies are difficult for lawyers, let alone users, to understand. TRUSTe was supposed to give users confidence in sites without needing to read their privacy policies. As I reported in my story, several P3P technologies will enable users to vote with their browsers without needing to rely on TRUSTe. This will further marginalize TRUSTe and force sites to P3P-enable their policies, which, in turn, will lead to better policies. Yahoo! has only a small window to make a little money off of its users’ private data. When the window closes, users will force it to either clean up its act or go the way of other failed portals.

James Mathewson is editor of ComputerUser magazine and

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