Tuesday, June 8, 2010

Consumer Privacy Versus Consumer Relevance

The draft privacy bill sponsored by representatives Boucher and Stearns is creating quite a stir in both the privacy advocacy and the online marketing worlds. It's a classic battle that pits technology as either a friend or foe depending upon your personal bias.

There are already a lot of blog posts and articles regarding the implications of this draft. I list a few of them here:
It is ironic to note that both privacy advocates and online marketers believe that they have the consumer's best interests in mind. Privacy advocates believe that consumers have a right to control the collection and the usage of their personal data albeit how obtuse it may be. Online marketers believe that consumers deserve to have the best online experience with highly relevent information.

Two points of this proposed privacy bill causing consternation among marketers include the following:
  1. IP address and browser cookies would be considered "covered information" and their usage for marketing purposes would become highly restricted.
  2. "Precise" geolocation information would be considered "sensitive information" and its usage would become even more restrictive than "covered information".

Web sites (especially e-commerce sites), ad networks, and even web analytics providers rely on information gleaned from IP addresses and browser cookies from anonymous site visitors. Almost all e-commerce sites ranging from Amazon to Zappos all use site visitors' browsing history to display the appropriate products on their web pages. Under the draft privacy bill, using a site visitor's browsing history to dynamically display page content would be allowed to continue provided that
  1. the site provides easy access to the company's privacy policy,
  2. it informs the consumer that he or she has the right to decline consent, and
  3. the consumer either specifically opts in or at least doesn't opt out.

Amazon.com's web site has a nice feature that enables me to prevent the site from tracking my browsing history.
However, once such a person opts out, then the marketer is not allowed to use the information previously collected on the person's browsing and purchase history during the time that he was opt-ed in.

The idea is that while I may still want to receive email marketing newsletter from my favorite brand, I may not want my personal browsing and shopping history to be included in them.

Web analytic providers and email marketers should take note of this provision. Vendors including Omniture, WebTrends, and Coremetrics enable marketers to build profiles of their customers' web site interactions and then target those profiles for specific remarketing campaigns via email or other channels. If the draft becomes law as it is currently written, then any marketer that does not inactivate an opt-ed out customer's web analytics data from his web analytics profile database and his email marketing database would be in violation of the law subject to severe penalties.

Another provision of the draft bill that is causing concerns among all marketers is the requirement that all "covered information" must be deleted or rendered anonymous if it has been 18 months since the date that the information was initially collected. Email marketers should take note of this provision because according to this draft, a subscriber's email address is considered "covered information." This means that even if you are a retention marketer and send your emails only to those who have opted in to receive then, the only ones that you can send to are those whose email records are less than 18 months old. If you have a single email address in your customer data that is older than 18 months old, then you are a law breaker.

While some brands would be thankful to have active email addresses 18 months old, there are many major brands having loyal customers whose email address records go back many years. Just think of the ramifications this bill would have on your email marketing program. How many dollars would you waste on thinking up and sending "re-enlistment" campaigns just to get your subscribers to re-create their email address records that you already have in your database? How many of you have built consumer tenure into your RFM (recency/frequency/monetary value) and RFC (recency/frequency/click through) models? How effective would they be if your subscriber database has artificially skewed tenure data?

Finally, the inclusion of "precise" geolocation information as "sensitive information" is an eyebrow raiser especially when it comes to mobile marketing. Aside from memories of Bill Clinton's famous "it depends on what you mean by 'is'", just how "precise" is "precise"? Precise to a city? Precise to a neighborhood? Precise to a house? Precise to within 3 feet? Precise to within 10 inches?

According to the draft bill, the collection and use of "sensitive information" requires prior consent. This means that the collection and usage of a consumer's geolocation collected either by your computer's IP address or your mobile device may not be done so for marketing purposes without that person first giving you permission to do so. If you are an e-commerce site operator, then think about how this will impact your site's user experience.

Amazon.com approximated my location by examining my IP address and determined that I live somewhere near Minneapolis/St. Paul, Minnesota. This is the default behavior of their site.

If this draft bill becomes law, then unless Amazon changes the default behavior of their site, then their web site is engaging in "an unfair and deceptive act or practice in violation of a regulation under section 18(a)(1)(B) of the Federal Trade Commission Act. In addition to being liable to federal penalties, Amazon would also be subject to civil action by any of all 50 states depending upon how motivated their Attorney Generals are.

Fortunately, the mobile marketing eco-system has arisen in a post-SPAM world although much work is still ahead. Marketers may only send SMS messages to those who have specifically opted in to receive them.

But not all mobile apps include the option for app owners to opt-in and opt-out of location based services. For example, I have the ShopSavvy app on my iPhone which finds and compares prices local to me. Short of removing the app from my iPhone, there is no way to inactive the location-based feature.

So what can you do about it?

Keep track of the discussion through the DMA, the ESPC, and others. As Lois Greisman, of the FTC cautioned during a recent webinar, the draft is still just a draft. Reps Boucher and Stearns, and the FTC are soliciting feedback which to some degree will be incorporated in coming revisions of the bill before it is put to the House floor for a vote. In the meantime, I do recommend that you keep track of this bill from time to time just to be informed. Depending upon where it goes, marketers and web site operators may be in for a lot of work to bring their tactics in line with the new law.

So, which side of the debate do you espouse? Both sides do have their own merits. Leave me your thoughts.

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