The true cost of online privacy

Do you like your privacy? I bet you do. What about being able to read all kinds of stuff on the internet without having to hand over your credit card number -- do you like that, too? I bet that's another yes. But which do you like more? You'd better figure that out quickly, because, if you don't, Congress just might decide for you.

Hoping to avert government regulation, a coalition of advertising and marketing groups today issued a set of guidelines for how its members ought to go about collecting and using information about consumers' online behavior. The guidelines are organized around a Buddhist-sounding list of seven principles, including a commitment to educate consumers about how behavioral advertising works, an embrace of transparency about how data is collected, and a pledge to give consumers more control over how information about them is used.
That's all to the good. But will it be enough to satisfy Congress? Maybe not. Whereas advertisers want to be able to track the online actions of anyone who doesn't actively opt out, according to Paid Content, many federal legislators would rather restrict such tracking only to those who explicitly opt in -- dramatically shrinking the amount of valuable data that could be culled and the number of highly-targeted ads that can be served.

And that's a problem to anyone who likes the internet more the way it is now: teeming with free, ungated, high-quality content. Online advertising is still far cheaper, on a cost-per-exposures basis, than advertising in other mediums; much of the high-quality content found on the internet now is, in effect, subsidized by other mediums whose business models are themselves threatened by the internet (such as newspapers and broadcast television). If online ad rates don't rise, the universe of available free content is likely to contract considerably. The easiest way to boost the cost of web advertising is to increase its value to advertisers by making it more effective with exactly the kind of behavioral tracking and targeting that Congress is looking to restrict.

You might not relish the idea of some guy who works at Google being able to see what porn sites you visited or how much hemorrhoid cream you purchased last week. But privacy fears are, for the most part, abstract concerns. Measures can be taken to insure that advertisers get the rich data they need even as individuals remain safely anonymous. On the other hand, heavy-handed federal legislation limiting ad targeting will assuredly hit us all in a place we'll feel it: in the wallet.
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