I'm Not Paranoid, But...

Online businesses need to give customers more control over personal data

I suppose I can't blame Amazon.com Inc. (AMZN ) for incessantly recommending that I buy a CD by an obscure Malian singer named Rokia Traore. Given my purchases of other Malian CDs on the Web site, the suggestion is actually spot-on. Or it would be, had I not bought it somewhere else already. But Amazon's automated recommendation program doesn't know that. Amazon--and every other site I visit or buy from--knows only a sliver of my preferences and buying behavior.

Frankly, that's the way I've wanted it. Sick of spam, I now employ six e-mail accounts regularly--reserving one for work, a second for friends, another for trusted businesses, yet another for merchants I'm not sure about, and so on. Worried about high-profile privacy breaches online, I even lie about personal details, such as my name or birth date, when I register at many Web sites. The result: Online, I'm a regular cyber-Sybil, creating a different identity for every site I visit. And I'm not alone. At least 24% of people lie about personal details online, according to a survey done last year by the Pew Internet & American Life Project.

Multiple personalities may not be a disorder online, but they're sure counter productive. For online buyers, maintaining all these identities is simply a hassle. I can barely remember my home phone number, let alone dozens of user names and passwords. And therein lies the problem for e-merchants: I forgo shopping at many sites because it's not worth creating yet another persona and keeping track of the details once I do.

So far, the potential solutions to this conundrum are pretty thin. Several companies, from startups such as Privada Inc. and YOUpowered Inc. to giant Microsoft Corp. (MSFT ), offer programs that run on personal computers or through Web sites and allow people to control which information they release to sites. But they haven't caught on because they're cumbersome to use. Others, such as Anonymizer.com and Zero-Knowledge Systems Inc., keep our identities secret by masking identifying information stored on PCs. But they prevent any possibility of a fruitful relationship with online sites. Says Jerry Michalski, who runs the San Francisco-based e-business consultancy Sociate: "They're a sort of virtual hermitage, and that's not a life anybody really wants."

The best solution: Online businesses should let us control our own data--and give us something in return if they want any of it. Online privacy is a huge concern not because people are paranoid. Mostly, they have a justifiable fear that they don't know how information about them will be used. Once we have control, we'll be much more willing to share more of our purchase history and preferences with sites we trust if we can get better deals, personalized services, or help in finding products we want. Indeed, the Pew survey found that 54% of Americans gave up personal information to sites to get content they wanted, and 10% more say they would.

Understandably, sites don't want to cede control of customer data that they think gives them an advantage. But most of them ultimately would gain much more than they would lose. Accurate consumer information can be a gold mine for targeting products to people ready to buy. And the more consumers have a stake in keeping that data accurate, the more they'll patronize sites that give them something for it: Think frequent-flier programs.

I hope online companies get wise pretty soon. Schizophrenia may be a necessary condition for online sanity right now. But those voices in my head tell me there's a better way.

By Robert D. Hof

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