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Privacy Controversy Dogs RFID Startup

How can a company that makes radio frequency identification ink for use on animals and humans head off bloggers' criticism?

On the face of it, Mark Pydynowski and Ramos Mays are a couple of young technology entrepreneurs like thousands of others hustling to gain some traction. They met a few years ago as teammates on the Washington University baseball team in St. Louis, and over the last year they have been pushing for the same things most early-stage tech companies push for: angel financing, patent protection, and completion of their first product (see BusinessWeek.com, 10/30/06, "Young, Fearless, and Smart").

It's that first product that distinguishes these two entrepreneurs from most others and has made their company, Somark Innovations of St. Louis, an Internet celebrity. When it issued a Jan. 9 press release at www.somarkinnovations.com stating that it had completed a successful phase in its product development of live animal tests of radio frequency identification (RFID) ink on cattle and rats, hundreds of e-mails poured in inquiring about everything from using the product in nuclear emergencies to distributing it in Europe…to using it to track soldiers.

Pydynowski estimates the company has been highlighted on at least 300 blogs with postings that range from how it could revolutionize cattle branding and make human tattooing easier to, more often, amazement at the science-fictional nature of the approach and worry about the implications to personal privacy. Its press releases get picked up by technology media such as InformationWeek and RFID Solutions Online.

An Issue of Privacy

Yet the kind of celebrity Somark has achieved is definitely a two-edged sword that raises marketing questions Pydynowski, 24, and Mays, 26, have thus far not figured out how to answer. The reason this tiny company is garnering so much attention is that it has developed what could be the next stage of a technology for tagging animals and people.

The issue of tagging has divided state governments, farmers, consumers, and investors. The U.S. Agriculture Dept. is pushing for tagging of all of the country's millions of farm animals under its National Animal Identification System (NAIS) program. Small-farm owners, who say the system infringes on their privacy, oppose the program (see BusinessWeek.com, 12/19/06, "Farmers Say No to Animal Tags").

Some critics of the NAIS program fear that tagging of animals will eventually evolve into tagging of people, and already one young company, VeriChip, has begun marketing RFID chips for implantation into the arms of humans (see BusinessWeek.com, 1/11/07, "Animal Tags for People?").

For Their Own Good?

Somark says its product, a bio-compatible ink applied like a tattoo, just under the skin of animals or people, acts in much the same way as an RFID tag, emitting a signal that can be picked up by a scanner a few feet away. Pydynowski is pleased to discuss the advantages of the Somark product over existing RFID tags for animals—namely, it can't fall off, is more easily read, and is considerably cheaper ($1 vs. about $2.50 per conventional tag). "It's a bulletproof tracking and identification system," he says of the Somark product.

But when I ask him about the application of the Somark product to people, he gets nervous. Rather than respond spontaneously, he refers me to a technology trade article that quoted him as saying the tattoo could be used by the military to track and rescue stranded soldiers. "It's a very scary proposition when you're dealing with humans, but with military personnel, we're talking about saving soldiers' lives and it may be something worthwhile," he says in the article.

Public Opinion

By being so cautious, Somark has in a sense allowed the blogging community to define the company. And that definition isn't often very favorable. Take this example from the Post

Menopausal Ponderings blog, which published the company's Jan. 9 news release announcing progress in development: "Another very bad 'innovation.' I tell you, we are on the way to being marked."

Adds another blog, called Thought-Crime, "People—if we can't wake the rest of America up, we'll all have those infamous tattoos on our forearms as we are corralled into concentration camps. Only this time around, they can monitor us electronically with the ink. Absolutely crazy." Pydynowski says he's become accustomed to the drumbeat of the blogs. "It's something you are going to have regardless of what you do." But I wonder. Is the blog flogging inevitable? Or could the company blunt its effects?

At a time when entrepreneurs are increasingly socially conscious—there are even business plan contests for socially conscious startups—I suspect Somark could get some respect by acknowledging the very real concerns farmers and consumers have about the privacy implications of RFID tagging.

Address the Concerns

Consider this approach: What if the company committed itself to not making the technology available for the tracking of people beyond use by the military to monitor soldiers? Or what if it insisted on specific safeguards to privacy before it would consider making its technology available for use on people? Yes, such commitments could dampen some potentially attractive market opportunities, but such opportunities are likely years off anyway, and in the meantime, the commitments might relieve a great deal of pressure that a young company can do without.

Even more broadly, the company might create a discussion area on its Web site where the issues around RFID tagging could be debated. The discussion would no doubt become passionate. Such openness might have the effect of disarming critics and creating a more favorable brand.

What I am suggesting is that a young startup facing passionate opposition to its first product may need to think more deeply about the implications of the product and then go on the offensive in an engaging way, rather than simply hunkering down.

For additional discussion on this issue, see David Gumpert's blog, www.thecompletepatient.com.

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