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Online privacy continues to garner much public concern. Two bills were introduced to Congress in the past year, one aimed at protecting children and the other more broadly aimed at all consumers, though neither made it out of committee. The FTC has also made rumblings with its “do-not-track” proposal (PDF), which would require internet browsers to include a do-not-track option for consumers, which in turn would inform every website visited that the consumer does not consent to tracking.
In the meantime, Facebook, Google, and even Amazon seem to know more and more about us every day. It is perhaps inevitable that at some point action will be taken, though the character of that action is unclear: will the government step in through law, or will the industry set up an acceptable standard to ward off government intervention?
But while privacy concerns rise, it is worth noting a similar rise in the array of free online services. Despite persistent rumors to the contrary, Facebook remains free. Among myriad other products, Google offers email, voice, maps, streaming music, streaming video, and software like GoogleEarth and Picasa for free. These are for-profit companies, though consumers might not know it. Consumers now expect most digital services to be free.
What monetization strategy supports this? In part, targeted ads. By tracking a consumer’s online behavior, ad services are able to deliver ads that target that consumer. For example, consumers who update their Facebook profile to indicate engagement might suddenly notice many ads that relate to weddings and honeymoons. Targeted ads generate more revenue because of their efficiency. They are also arguably better for the consumer because they decrease noise and increase relevant information–that is, information regarding goods and services that the consumer is likely interested in.
Of course, targeted ads are not the only way to finance free online services. However, if consumers, in the name of privacy, prevent online tracking, they may find a reduction in free content or at least an inclusion of much more obtrusive forms of advertising. In effect, consumers have been selling knowledge of their online behavior in exchange for free services. None of this is to say that disclosure is not important. Consumers should be able to withhold consent, and they have a legitimate interest in knowing and controlling exactly what companies are doing with their information. But we should at least consider the benefits of online tracking before we demonize it completely.
– Joel Slater
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