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BUSINESS LAW & ETHICS CORNER

Personal privacy and Internet marketing: Animpossible conflict or a marriage made in heaven?

Linda Christiansen

School of Business, Indiana University Southeast, 4201 Grant Line Road, New Albany, IN 47150, U.S.A.

1. Collision: Technology versus

personal privacy

Who is watching you? Who is collecting your personaland private information? Who has purchased yourpersonal information, and that of your children, foruses both constructive and predatory in nature? If

you have volunteered data on a website, do you

know what

is

being

done

with your

private

informa-tion? What are the benefits and problems associatedwith personal data collection?

Recently, many U.S. citizens were disturbed bythe implementation of a new security-check systeminstalled at several airports nationwide. Travelerspassing through these facilities face a choice of either undergoing an x-ray scan or enduring a full-body patdown before being allowed to board flights.

Business Horizons (2011) 54, 509—514

www.elsevier.com/locate/bushor

KEYWORDSPersonal privacy;Marketing;Internet marketing;Data mining

Abstract With the decline of print media and network television, marketingstrategy is changing. As these advertising vehicles are slowing down and moreindividuals turn to the Internet for daily functioning, marketers are following inkind. Technology offers businesses and marketing specialists the ability to collectimmense amounts of private data about individuals’ interests or characteristics asthey surf the Internet and input personal information. Data collection falls into one of two categories: a user’s voluntary sharing of such information, or involuntary/uninformed collection by other parties. The threat posed by invasion of personalprivacy is real. At the same time, Internet users can benefit in several ways from thesharing and collection of personal information. For example, much online content isfunded by advertising, and would otherwise only be available to consumers for a fee.Additionally, valuable information regarding trends and happenings (e.g., flu out-breaks) are detected by aggregated Internet tracking. Finally, many Internet users

value and enjoy targeted advertising geared to their particular interests or needs.Laws regarding this matter are currently limited, but are developing in order toprotect individuals from unscrupulous data collection, especially involving children.Fortunately, there are ways marketers can legally and ethically collect and usepersonal information. Ultimately, regulation needs to be developed, and the market-ing profession can aid itselfby expanding self-regulation and policing in order to staveoff additional–—and potentially onerous–—regulation.# 2011 Kelley School of Business, Indiana University. All rights reserved.

E-mail address: [email protected]

0007-6813/$ — see front matter # 2011 Kelley School of Business, Indiana University. All rights reserved.doi:10.1016/j.bushor.2011.06.002

http://dx.doi.org/10.1016/j.bushor.2011.06.002







mailto:[email protected]



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While some have expressed concern regarding radi-ation exposure from the x-rays, others are upsetbecause they feel they’re being forced to choosebetween two privacy violations: total body imagingor extensive physical touching. One has to wonderabout the irony: Why the great unease surroundingpersonal privacy at the airport when so many people

regularly share

very important

and

valuable

infor-mation online without giving it a second thought?While privacy may be invaded in both cases, thepotential risk for long-term harm is far greater withonline sharing of personal information.

2. Demand for personal information inmarketing

Marketers are hungry for personal information suchthat they may more effectively use their dollars

toward

targeted

advertising. The

online

ad

industry,alone, totals $23 billion and continues to grow(Angwin & Valentino-DeVries, 2010). For businesseseager tomarket their goods and services,informationregarding a person’s demographics, income, inter-ests, and habits represents a gold mine. Marketersand business executives knowthat a customer is morelikely to complete a purchase when the message isprecisely targeted toward him or her, as opposed tobeing more general in nature. This is called target

marketing, and while far more expensive per expo-sure than traditional advertising, it is also morelucrative in that it provides less wasted coverage.The question is: How do marketers collect and usethis information to effectively deliver targeted ad-vertising? The Internet has been the best answer tothis question since marketing came into existence.

In recent years, marketers have observed thedecline of the traditional stalwarts of marketing:print media and network television. The Internethas displaced many of the traditional forms of adver-tising media and, as a result, marketers have fol-lowed consumers to this medium. At the same time,the Internet and evolving technologies provideuniqueopportunities to collect and organize personal

information about individual users into specific pro-files. Consequently, target marketing utilizing per-sonal information from these types of profiledatabases has become the Holy Grail of the industry.

3. Approaches to collection and usageof personal information

Target marketing requires the collection, retention,and analysis of information about users. Because it is

based on valuable consumer information, websitesare able to charge a premium to place ads based onthe parameters selected by the advertisers. Web-sites and ad networks can take several approachesto the collection and use of personal information. Itis important to understand the distinctions in orderto analyze the issue at hand.

Personal information

from the

Internet

can

becollected by a variety of parties. For some compa-nies, data collection is merely a side business; othersintentionally track Internet users, organize that da-ta, and sell the profileof informationtheydevelop. Inmany cases, individual websites themselves are col-lecting information. For example, Facebook utilizesinformation from users to post targeted ads on indi-viduals’ pages. If a user falls into a certain age group,has discussed travel,or posted about having children,he or she should see ads related to these topics.Another example is Amazon.com, which makesproduct suggestions to customers based on theirpast purchases and/or searches. In both cases, thewebsites–—Facebook and Amazon–—are using infor-mation they have collected to market to consumers.

An online advertising network, or ad network, is acompany in the business of collecting and utilizinginformation from website users. This third-partybusiness acts as a broker, connecting advertisers withmultiple websites that have collected user informa-tion and also have ad space to sell. An ad networkhelps websites sell ad space, while aiding advertisersinfinding targeted placement ofadvertisements.Theremaining data-collection businesses purchase infor-

mation from a variety of sources with the expresspurpose of building and selling profiles bearing iden-tifiable information connected to specific people.Websites can employ several approaches to datacollection, including the following three methods:

1. Collect personal data, then anonymize and ag-

gregate it to sell to third parties and/or to use

internally . In some cases, a website or ad net-work will collect information from Web users andorganize it in a database but–—instead of sellingidentifiable information–—will use or sell aggre-

gated

information

to third

parties. This

informa-tion is valuable for advertisers to determine theoverall characteristics of the website’s users.The website itself could also use this informationto strategize regarding content decisions and tosell advertisements. This type of informationcollection and dissemination is not as invasiveas the other methods if limited to this purpose.

2. Collect personal data, keeping personal data

within the company but providing the opportu-

nity for advertisers to specify a certain range of

510 BUSINESS LAW & ETHICS CORNER



traits for target marketing. Advertisers pay apremium for ad placement directed to thoseusers who meet the advertisers’specific criteria.Although the existence of data collection andretention might be considered questionable bysome, if information kept within the website isbeing accessed and used only by the party with

which the

user

shared

the

information, usersshould not be alarmed.

3. Collect personal data with the intention of sell-

ing the information, sometimes including specif-

ic profiles or names, to third parties . Websitesand Internet service providers (ISPs) have theability to accumulate users’ personal informa-tion in a database, to offer for sale to outsidepartners. The third-partyfirms then compile thatinformation into a comprehensive database forextensive and long-term data mining. Profiles of individuals are available for sale to anyone withan interest and money to pay the fee. While thisis a growing industry, many websites and adnetworks are reluctant to sell customers’ infor-mation because doing so could limit their abilityto sell targeted advertising. This is the type of data collection, retention, and sales that is mostintrusive from a personal privacy perspective.

4. Types of sharing of personalinformation and related privacyconcerns

Privacy concerns vary by the circumstance of onlinedisclosures. Disclosures may fall into the followingthree categories.

4.1. Voluntary sharing or disclosure byadults

One relatively benign example of this is the sharingof preferences or product reviews with websitessuch as Amazon or Netflix. In many other cases,though, people do not exercise sufficient caution

in sharing

personal

information

under

certain

cir-cumstances. Subjecting themselves to this potentialdanger could stem from a lack of awareness, fromnot taking the time to read privacy policies, or froma generalized lack of concern–—even if these factorsare known. Too often, individuals click throughwarnings, permission requests, and privacy policieswithout thinking about how it may impact theirprivacy. Even adults can exercise poor judgmentby revealing personal information via Facebook orblog posts, not taking into consideration possibleinformation collection and use by other parties.

4.2. Taking of information from adults(involuntary disclosure)

This malicious method involves the use of tech-nology to collect data and track movements byInternet users without their knowledge and/orpermission. For instance, the placement of Web

browser

text files–—known

as

cookies –—is

used

bywebsites to track files and Internet viewing histo-ries. Cookies are used in online target marketing,as well as to aid collection of information andbuilding of personal profiles. Some ‘flash cookies’are so invasive that they are stored in two areasof the computer and can reinstate themselveseven if a computer user has deleted the cookiefile (Vega, 2010).

Even more invasive, deep packet inspection in-volves the reading and analyzing of ‘packets’ of information traveling across the Internet. The pur-pose is to monitor all online activity of an Internetuser, not just Web browsing, resulting in extremelydetailed profiles of that user (Stecklow & Sonne,2010). History sniffing allows the third party to runcode ina user’s Web browser to detect certain sitesvisited (Vascellaro, 2010). Scraping, a particularlyworrisome method of data collection, involvesgathering personal details shared on forum discus-sions and social media sites in order to expand andflesh-out personal profiles of specific people, evenwhen sites are for members only or are intendedto be confidential (Angwin & Stecklow, 2010). An-other invasive method is digital-device finger-

printing, which tracks online activities to buildprofiles using the digital fingerprint–—or identifi-able traits–—of every electronic device in use. Eachindividual device is distinguished by the variousways it is unique, such as the clock setting, soft-ware, and hardware identification number (Angwin& Valentino-DeVries, 2010). And most recently, thepress is reporting that smartphones can help trackusers’ movements, relationships, moods, health,calling habits, and spending patterns, as well asmovements in the Dow Jones Industrial Averageand the spread of political ideas in the aggregate

(Hotz, 2011).These escalating, egregious, and invasive exam-ples of private-information collection are becomingmore common. When these methods of data collec-tion are employed, the computer user is typicallyunaware and has no idea how to protect his or herpersonal information.

4.3. Sharing by children

While disclosure by adults can be separated into thecategories of voluntary and involuntary, any sharing

BUSINESS LAW & ETHICS CORNER 511



of personal information by children is problematic.Children obviously have limited capacity, both prac-tically and legally, to discern when disclosure of personal information is proper and safe. Studiesshow that, in general, children’s websites depositmore cookies than mainstream websites visited byadults; one study found that 50 popular children’s

websites

deposited

4,123

cookies

on

a

computer–—30% more than deposited by the 50 most popularU.S.-based websites (Stecklow, 2010).

5. Ways individuals can be harmed bydata collection/retention of personalinformation

People may be harmed by data collection and yetnot realize it, or even anticipate the level of dam-age. Indeed, the results can prove to be costly andpotentially embarrassing, and certainly extend be-yond what one might imagine. Personal informationgleaned from the Internet has been used in thefollowing circumstances:

Running of background checks by employers forhiring decisions;

Pricing and assessing risk of injury or death byinsurance companies (based on Internet searches,blogs, and confidential online support groups, forexample);

Termination decisions by employers (for example,if a user is criticizing the workplace or found tobelying to the employer);

Recruiting and scholarship decisions by athleticcoaches;

Searching for relevant evidence by attorneys inthe course of case preparation;

Detecting political leanings for fundraising pur-

poses

and

to target

individuals

who are

undecidedon an issue or a candidate; and

Facilitating criminal attacks.

6. Protection of personal privacy

Increases in threats to personal privacy and corre-sponding outcries of concern have prompted move-ment in the protection of private information

collected by online methods. Four specific arenasof development are analyzed next.

6.1. The legal system

Use of the legal system through litigation and legis-lation to protect online privacy rights is gaining

momentum. Consider

the

following

three fields

of action: litigation, existing legislation, and proposedlegislation.

6.1.1. LitigationIn 2001, the use of cookies to collect information wasruled a legitimate, lawfulactivity;that precedent hasnot been overturned in the years since (DoubleClick,2001).Topical lawsuits have dealt with cookies placedon mobile phones, and the aforementioned regener-ating flash cookies (Vega, 2010). Most recently, someiPhone and iPad owners are suing Apple for invasionof privacy and computer fraud as a result of thedevices’ collection and retention of up to one-year’slocation data. Following on the heels of these liti-gation trends, government regulators worldwide arelaunching investigations regarding these allegations(Gullo, 2011).

6.1.2. Existing legislationThe Children’s Online Privacy Protection Act of 1998(15 U.S.C. 6501-6506 (supp. V2000)), or COPPA,prevents organizations from collecting–—without pa-rental permission–—personal information from chil-dren up to their 13th birthday. Although this statute

is limited, it at least provides some protection forchildren under age 13; however, children aged 13years and older are not protected by a similarstatute. For Internet users of all ages, other existingstatutes provide a variety of restrictions governingactivity, but only offer a patchwork of protection forsome of these issues.

6.1.3. Proposed legislation: The CommercialPrivacy Bill of RightsProposed in Congress last April by Senators JohnKerry and John McCain, the Commercial Privacy Bill

of Rights

Act

(2011) would

create

consumer

privacyrights, including notice, consent, access, and cor-rection of information accumulated by collectorsand parties employed by them. These entities wouldbe required to implement security measures toprotect the information they collect and maintain.Additionally, collectors would be allowed to gatheronly the information necessary for the transactionor service, and other limited circumstances. Finally,they would be required to use reasonable proce-dures to ensure accuracy.




6.2. National ‘Do Not Track’ lists

These lists, similar to the national Do Not Call lists,have been proposed as a possible solution for grow-ing privacy concerns.

6.3. Web browser ‘Do Not Track’ feature

These options are being added to most mainstreamWeb browsers. However, this protection is depen-dent on ad networks voluntarily honoring the desiresof the users, as there is no force of law behind suchdesires at this point.

6.4. Educating the public

An increased emphasis on public and parental edu-cation would be an effective complement to theseother methods, to increase privacy protection with

user

awareness.

7. Recommendations for themarketing industry and governmentregulators

Internet marketing is clearly here to stay, and itshould be legal and ethical, as well as beneficial.Achieving a balance of appropriate online data col-lection and effective marketing depends on theidentification and implementation of standards

and practices by which benefits outweigh harms,and some degree of control is afforded to the indi-vidual user.

Online marketing is vital to the Internet as weknow it. Somuch online content is either free or lessexpensive because it is supported by advertisers.And some consumers truly want to be tracked fortargeted advertisements; they regularly registerfor email notifications of sales and product offer-ings. Many Internet users prefer that ads and sug-gested merchandise be geared toward theirinterests and demographics. And because websites

are able to charge a

premium for

the targetedadvertising, all parties benefit–—the website own-ers, Internet users, and advertisers–—when targetmarketing is utilized.

7.1. Government regulation

To encourage effective Internet marketing whilealso protecting Internet users’ personal privacy,improper uses of data must be restricted and

punished while beneficial uses are concurrentlymanaged. Online data collection of personal infor-mation may be addressed by government regulationin the following ways:

1. Prohibit egregious activities, such as the buildingand selling of names/profiles without user per-

mission, and

fraudulent

practices. Governmentintervention offers the best chance to prohibitand punish this behavior.

2. Manage neutral activities, including anonymizedaggregated data for trends or macro-feedback,such that the information is used positively andnot as an invasion of privacy.

3. Encourage beneficial activities–—including usersign up/opt-in for targeted ads and free or inex-pensive Web content–—as long as the correlateddata collection and retention is protected, andperformed in compliance with existing laws.

7.2. Marketing industry self-regulation

No one knows better than marketers the value of online advertising. The marketing profession, as awhole, should realize that it is better to proactivelyself-regulate than to wait for government interven-tion. When government becomes involved, condi-tions have typically reached a fevered pitch, andCongress’ reaction can be extreme. Voluntarily pro-

viding full disclosure to consumers, as well as vari-ous privacy options, is far preferable to onerousregulation by the government and/or consumerbacklash.

Websites and ad networks should post clear, con-cise, and fair privacy policies and settings, and thenadhere strictly to user preferences. Industry mem-bers should also consider making their websitesdefault to opt-out of data collection and targetmarketing, allowing interested users to make theopt-in decision if they so choose.

Online data collection and profile building has

mushroomed

in

recent

years,

and

its

threat

topersonal privacy is growing exponentially. Publicawareness regarding some of these invasive meth-ods is beginning to emerge. Unfortunately, how-ever, most people are unaware of the informationtrail they leave when surfing the Internet, and arealso unaware of the myriad commercial uses fortheir private information. Employing the stepsoutlined here, Internet marketing can benefitand flourish, while personal privacy remainsprotected.

BUSINESS LAW & ETHICS CORNER 513



References

Angwin, J.,& Stecklow, S. (2010, October 12).‘Scrapers’ dig deepfor data on Web. TheWall Street Journal. Retrieved April 24,2011, from http://online.wsj.com/article/SB10001424052748703358504575544381288117888.html

Angwin,J., & Valentino-DeVries,J. (2010, November 30).Race is onto ‘fingerprint’phones,PCs.TheWall Street Journal. Retrieved

April 24, 2011, from http://online.wsj.com/article/SB10001424052748704679204575646704100959546.html

Commercial Privacy Bill of Rights Act. (2011). 112th Congress, 1st

Session, BAG11284DoubleClick, (2001). Privacy Litigation, 154 F. Supp, 2d 497.

(S.D.N.Y. 2001)Gullo, K. (2011, April 25). Apple accused in suit of tracking iPad,

iPhone user location. Bloomberg. Retrieved April 28, 2011,from http://www.bloomberg.com/news/2011-04-25/apple-accused-in-suit-of-tracking-ipad-iphone-user-location-1-.html

Hotz, R.L. (2011, April 23). The really smart phone. The Wall

Street Journal. Retrieved April 24, 2011, from http://online.wsj.com/article/SB10001424052748704547604576263261679848814.html

Stecklow, S. (2010, September 17). On the Web, children faceintensive tracking. The Wall Street Journal. Retrieved April24, 2011, from http://online.wsj.com/article/SB10001424052748703904304575497903523187146.html

Stecklow, S., & Sonne, P. (2010, November 24). Shunned profiling

technology on the verge of comeback. TheWall Street Journal.Retrieved April 24,2011, from http://online.wsj.com/article/SB10001424052748704243904575630751094784516.html

Vascellaro, J. (2010, December 5). Lawsuit targets an online datacollection technique.TheWall Street Journal. Retrieved April24, 2011, from http://online.wsj.com/article/SB10001424052748704767804575654910216593180.html

Vega, T. (2010, September 20). Code that tracks users’ browsingprompts lawsuits.TheNewYorkTimes .Retrieved April 24,2011,from http://www.nytimes.com/2010/09/21/technology/21cookie.html


http://online.wsj.com/article/SB10001424052748703358504575544381288117888.html




http://www.bloomberg.com/news/2011-04-25/apple-accused-in-suit-of-tracking-ipad-iphone-user-location-1-.html












http://www.nytimes.com/2010/09/21/technology/21cookie.html




















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