The recipe for a worse Internet

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fire_small.jpgDM Confidential – I think we have all heard the expression the customer is always right. It’s a saying that somehow the majority of American consumers have internalized, acting with a growing sense of entitlement. As consumers, we don’t mind such coddling, but when on the other side of the fence, with our business hat on, that attitude can cause some conflicts.

There is another factor to consider as well, one that drives a large portion of the performance-based marketing world. The fact, as so many know, is that a large percentage of users aren’t that sophisticated. That creates a problem when we have users who think they are right but are actually wrong. And, when lawmakers try to listen to them, it is like dousing a flame with fuel thinking that will help put it out.

The online advertising world is having to go through this now. It’s a battle of business innovation versus ill-informed customers and lawmakers thinking they know enough to help. It’s a disaster waiting to happen that is starting to happen, and involves something those in the online advertising world take for granted — tracking.

According to a study covered in The New York Times, about two-thirds of Americans object to online tracking. As the article states, “Privacy advocates are telling Congress and the Federal Trade Commission that tracking of online activities by Web sites and advertisers has gone too far, and the lawmakers seem to be listening.”

The problem is that people confuse violations of privacy with personalization. No one wants their privacy violated. We’re entering into a world where it’s harder and harder to be private, but that doesn’t mean we shouldn’t have some protection. The right to privacy is key, but once we start applying the word to areas that it doesn’t fully describe, we hurt both the true meaning of privacy and in this case Internet advertising.

There is a big difference between a malicious entity trying to gather personally identifiable information to use it against you and advertising try to create a more efficient and effective online advertising model. Google is a great example. They have had some major improvements on the pay-per-click landscape that GoTo/Overture created, among the first being that they ranked ads on an RPM basis not pure-click basis.

We can’t rule out innovations like ranking ads based on RPM as a reason why Google has gotten so good at monetization, but what fuels those innovations, especially quality score, and really sets them apart is data. Google sees so much data about all activity, even a holy being might have trouble being more omniscient. And, unlike traditional advertising companies, Google doesn’t have to rely on cookie data for much of it.

They either own enough data themselves, such as the millions of toolbars installed on machines monitoring everything visited and activity on those sites, to little discussed relationships with web browsers such as Opera and Firefox which report back an enormous amount of data to Google in addition to the first party data from their own browser. Google also has relationships with ISPs that allows them to further the all seeing eye, and I’m sure we are missing some, like mobile phones.

Are users aware of this and do they realize that their search experience would suffer were Google not allowed to use that data? Tracking cookies are nothing. They at least can be blocked.

Ask users if they feel comfortable having sites follow them around and of course the answer is likely to be no. The same goes for the term “tracking cookie” or “behavioral targeting.” It doesn’t draw up innately positive images in users’ minds. What’s amazing though is that being tracked and targeted is so common offline.

Direct mail is my favorite example. The credit bureaus, while helping systematize the process of determining credit worthiness, make a large amount of money crafting lists for marketers. While I’m biased, it feels much more like an invasion of “privacy” knowing that there is little control or transparency over how companies send me mail.

That example, though, has less to do with my feelings on direct mail and more to do with the role data has played and needs to play in advertising. The web simply makes it more difficult for users to comprehend and more immediate.

The Center for Democracy & Technology writes, “Long after data is collected, it lives in a Wild West of shared and sold personal profiles and databases that give consumers no control over how their identities will be tracked and used.” As though we do elsewhere?

No changes are happening yet. The FTC is having a privacy round table in early December, with the results of these discussions leading to potential policy suggestions. The scariest threat comes from other lawmakers.

As we mentioned last week, a committee in the Senate is investigating post-purchase transactions, having published a report called, “Aggressive Sales Tactics on the Internet and Their Impact on American Consumers.” They believe web companies have “duped” users out of $1.4 billion over the last 10 years (yes, 10). Those they accuse are definitely guilty of crafting a process that made it too easy for users to convert without thinking through it first.

But it’s a danger to have someone start to vilify all post-transaction charges as scammy especially when they don’t even fully understand the difference between post-transaction and in the process of transacting. There is a level of sophistication needed, and that is certainly the case for companies in the online space. Otherwise some of the best advances will not happen, while those with the most data will continue as is.

It’s hard enough to make money on the Internet as is. Yet we keep making it harder and harder on ourselves by waiting to change until those who don’t understand the full picture try and dictate how the game is played.

1 COMMENT

  1. “Post-purchase transactions”? Can we be a little more clear on that?

    My guess is that, it is about flogs again.

    As I understand it, some of those diet (and maybe teeth-whitening) campaigns are actually signing up the customer for an ongoing “subscription.” So that, each month, the credit card they submitted on the first transaction is charged again, and they receive another bottle of product in their snail-mail.

    The problem there is that the customer may have thought s/he was just ordering one bottle, one time. And didn’t see the fine print about the ongoing supply (and charges.)

    And, it is viewed as one component a generally sleazy big picture. Because those campaigns are also related to fake celeb endorsements, fake photos of fake results, and positive reviews by fake bloggers. Thus resulting in that recent FTC ruling about all blogging endorsements.

    And the sleaze goes bone-deep. Adult sites have been using that tactic for a long time. The customer is sold a, “trial” for $3.95, (or even for “free” with the card number as an alleged age-verification) to look at the naughty pictures. And then is surprised to find a $29.95 charge the following month. With deliberately poor customer service when trying to cancel.

    In fact, AOL was accused of such practices back in the 90s (maybe more recently?) Where those ubiquitous “25 Free Hours” disks could turn into subscription with serious hassle to cancel it.

    As usual, the sleaze-bags degrade things for the rest of us who try to act legitimately.

    OTOH, all of that has nothing to do with behavioural tracking.

    I am extremely curious about the briefly mentioned, “little discussed relationships with web browsers such as Opera and Firefox which report back an enormous amount of data to Google…” What’s that all about? I thought that, the big danger was cookies and toolbars(?)

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