Category: Advertising

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B Corps for Bankers

Claire Hill and Richard Painter’s new Better Bankers, Better Banks aims to find a way forward by looking backward – and by casting a few sidelong glances as well. It is valuable for what it has to say about the view in all directions.

Begin from where we are – the point from which Hill and Painter would like to see forward movement. Where we are now is a world in which, even seven years out from the crash of ’08, banking scandal is near boring in its ubiquity. From Libor in 2012 to Euribor, forex, commodity and precious metal cornering thereafter, the story of financial markets of late seems an unending parade of horribles.

How do we get out of this seeming cesspool? Here is where Hill and Painter look backward and sideways.

First let’s look back. Time was when ‘bankers’ – Hill and Painter employ the term broadly to cover all folk who hold ‘other folks’ money’ – invested not only our money, but their money too. By organizing as general partnerships whose partners were jointly and severally liable for losses, they kept, as the current idiom has it, ‘skin in the game.’ This of course aligned their interests with client and institutional interests – to some extent, anyway. (Names like ‘Jay Gould’ should remind us that ‘some extent’ wasn’t the ‘full extent.’) And so there were limits on how much by way of other folks’ money the bankers were likely to fritter away.

Now let’s look sideways. There appears to be growing consensus, in the face of such scandals as those just rehearsed, that our regulatory and law enforcement regimes’ penchant for penalizing banks rather than bankers just isn’t cutting it. Compared to the gains to be had from wrongful behavior unlikely to be caught, even five or twelve billion dollar settlements between banks and their regulators are chump change. Oughtn’t we, then, focus our efforts upon the human agents through whom the banks act? After all, five billion – or five years in jail – are more likely to pinch if you’re human.

Hill and Painter like what they see in both directions. They find limitations, however, in how effective the enforcement of finance-regulatory provisions can be. These, they believe, are just too easy to game – a fact that might partly account for regulators’ going after the banks rather than the bankers in the first place. Why not, then, take yet another sidelong glance in another direction – that of contemporary moves to simulate better regulation through private ordering? Are there not means, for example, of appealing to socially responsible investors by committing to operate as a socially responsible business – e.g., as a ‘B Corp’ or ‘Benefit Corp’?

Indeed there are, and though they do not discuss these new business forms, Hill and Painter valuably adapt, in effect, the idea behind them to financial firms. Herewith the authors’ novel suggestion to introduce a practice of what they call ‘Covenant Banking.’ The idea is for financial firms whose owners or managers are comfortable with the idea to undertake ‘skin in the game’ commitments on the part of their managers. Managers would voluntarily assume some liability for losses, thereby partly replicating the ancien regime of pre-corporate partnership banking. Investors could then choose between what kinds of institutions through which they invest – the more risk-averse perhaps working through covenant banks, the more risk-cavalier working through today’s more familiar casinoish firms.

It would be hard not to like this proposal. What’s not to like? Like recent proposals for Wall Street voluntarily to maintain ‘naughty lists‘ of bankers who have gotten themselves into trouble, it imposes nothing, yet offers something – the prospect of ‘better bankers,’ hence ‘better banks,’ for at least some investors. It simply expands the field of choice, and who in these times doesn’t like choice?

If I have any reservations about Hill and Painter’s proposal or their brief in its favor, they have to do with the prospect of some people’s possibly taking the authors to claim or to promise more than they actually intend.

To begin with, we should note that wrongs such as those alleged in connection with Libor, Euribor, forex, and commodity and precious metal cornering are not wrongs of excessive risk-taking. They are wrongs of sheer fraud and manipulation. It isn’t the case that ‘skin in the game’ on the part of the relevant fraudsters in these cases ‘would’ have helped; the ‘skin’ seems to have been at the core of the ‘game’ from the start, and was indeed part of the problem – the fraudsters profited precisely by illicitly betting their own money on what they controlled. Hill and Painter, then, should not be taken to be targeting this form of market abuse through their proposal.

A distinct but related point has to do with the lead-up, not to 2012 and after, but to 2008. It is still common to hear that year’s cataclysm blamed upon venal behavior or ‘excessive risk-taking’ by ‘bankers.’ And such behavior clearly occurred – it always does. But a very strong case can be made – I think I and others have made it – that the principal causes of 2008 were more radical than mere vice or recklessness on the part of some bankers. They are endemic to capitalism itself absent serious and sustained effort on the part of the polity to distribute capital’s returns – or capital itself – far more equitably than we’d managed before 1929 or between 1970 and 2008. ‘Better bankers’ would certainly be better than worse bankers; better still would be better distributions of that with which bankers bank.

Finally, there is a danger in underselling what proper law enforcement, adequately funded and staffed, can do where finance-regulation is concerned. When Wall Street contributes more to political campaigns than most other industries, when DOJ officials openly admit to having feared to prosecute bankers for fear of rattling markets, and when regulators like the CFTC and the SEC are chronically understaffed and underfunded, we should be skeptical of suggestions that ‘gameability’ of the rules is the sole – or even principal – reason for old fashioned law enforcement’s not having eradicated rulebreaking by financiers. Indeed, as Hill and Painter themselves note, a rule change at the NYSE in 1970 played a critical role in the move from partnership to incorporated form among Wall Street investment banks. If that is so, could a legal re-imposition of some variant of the old rule not itself make for ‘better bankers’?

None of these caveats should be taken as more than what they are – mere caveats. There is much, much to be learned from a reading of Hill and Painter, and much is quite plausibly promised by their Covenant Banking. And since, as before noted, their proposal is made in effect to the banks rather than the polity, it seems to be all upside, no down. Let, then, those bankers intrigued by the Hill/Painter proposal give it a go. One might even imagine some funds offering their services in A and B flavors, so to speak – in Covenant and Noncovenant forms. In such case consistently better performance by one kind over the other might in future foment a stampede to the winning kind, and with it a privately worked transformation.

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Authentic Brands

What is authentic? The question seems to pop up in many areas. If a company or corporation claims authenticity, I am sure several folks I know would have a reflexive reaction that such a claim is absurd. Nonetheless, the Economist notes that “Authenticity” is being peddled as a cure for drooping brands. One part of the article notes that despite the ongoing difficulties in valuing brands, “when brands are sold as part of corporate takeovers, what price do investors put on them? They found that these prices, as a percentage of deals’ total value, have dropped since 2003. So, at least for those firms being taken over, the strength of their brands is becoming a smaller share of their overall worth.” That is interesting insofar as it suggests that 1) Brand value (and goodwill in that sense) can be measured and 2) That is has gone down.

What is driving the change? A key thing I have tried to show is that the issue of information or search costs is not as high as it used to be and that change brings into question many aspects of trademark law and policy. The Economist seems to agree and puts it this way

It is not hard to see why the old marketing magic is fading, in an age in which people can instantly learn truths (and indeed untruths) about the things they are contemplating buying. Online reviews and friends’ comments on social media help consumers see a product’s underlying merits and demerits, not the image that its makers are trying to build around it. The ease of accessing information makes consumers more likely to abandon their habitual brands because they have heard about something new, or learned that retailers’ own-label products are much the same, except cheaper. Depending on your perspective, people are either increasingly fickle or ever more impermeable to marketing bullshit. For brands that lack any truly distinguishing features, that is bad news.

Better information and new sources of it change the legal and brand landscape. Plus an old problem–trying to sell essentially the same goods–has returned. As Spencer Waller and I noted, “From the end of the nineteenth century to the middle of the twentieth century to today, companies have had to find ways to compete over selling essentially the same goods and manage excess production capacity.” So it is not surprising that the sectors most hit by the change The Economist discusses are consumer goods and imported goods that no longer offer difference from other, lower-cost options of the same or close to same quality.

So can a corporation be authentic? If a corporation is slinging its authenticity with Keebler Elves and Santa Claus in Coke Red, that is a harder sell. Those plays will be claiming authenticity based on cultural history and maybe a done deal in that sense (as Spencer and I discussed, the history of firms using events and education to build a sense of community and identity is old). But insofar as craft brewing, locally-made goods, and customized offerings are claiming authenticity, those may fit the authenticity claim; as long as that claim is that the item is not from a firm of a certain size or somehow to be distrusted because of size, for Scalia was correct in Citizens United that many firms of many sizes can be corporations. Assuming small and personal is a sort of authenticity, where I am not sure The Economist is correct is its example of Apple. The newspaper offers

for those firms that get the product right and have a genuine story to tell, the rewards can still be huge. The textbook example of this is Apple, whose devices’ superior design and ease of use make it a powerful brand in a commoditised market. Last year it had only 6% of the revenues in the personal-computer market, but 28% of the profits. That’s real authenticity.

If getting the product “right” is the key, then the competition is about old school “my goods and services are better quality than yours.” If the story is also key, then we have to start asking whether Apple’s claims are accurate or myth-making “bullshit” as the Economist might say. I like Apple products as they fit my needs. I buy them despite the over-claimed genius we are all tech saviors rubbish they sling. It is authentic as long as it authentic here means 100% Silicon Valley hubris. So pure it …

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Exploration and Exploitation – Ideas from Business and Computer Science

One of the key reasons I joined GA Tech and the Scheller College of Business is that I tend to draw on technology and business literature, and GA Tech is a great place for both. My current paper Exploration and Exploitation: An Essay on (Machine) Learning, Algorithms, and Information Provision draws on both these literatures. A key work on the idea of exploration versus exploitation in the business literature is James G. March, Exploration and Exploitation in Organizational Learning, 2 ORG. SCI. 71 (1989) which as far as I can tell has not been picked up in the legal literature. A good follow up to that paper is Anil K. Gupta, Ken Smith, and Christina Shalley, The Interplay Between Exploration and Exploitation, 49 ACAD. MGMT. J. 693 (2006). I had come upon the issue as a computer science question when working on a draft of my paper Constitutional Limits on Surveillance: Associational Freedom in the Age of Data Hoarding. That paper was part of my thoughts on artificial intelligence, algorithms, and the law. In the end, the material did not fit there, but it fits the new work. And as I have started to connect with folks in the machine learning group at GA Tech, I have been able to press on how this idea comes up in technology and computer science. The paper has benefitted from feedback from Danielle Citron, James Grimmelmann, and Peter Swire. I also offer many thanks to the Loyola University Chicago Law Journal. The paper started as a short piece (I think I wanted to stay at about five to eight thousand words), but as it evolved, the editors were most gracious in letting me use an asynchronous editing process to hit the final 18,000 or so total word count.

I think the work speaks to general issues of information provision and also applies to current issues regarding the way news and online competition work. As one specific matter, I take on the idea of serendipity which I think “is a seductive, overstated idea. Serendipity works because of relevancy.” I offer the idea of salient serendipity to clarify what type of serendipity matters. The abstract is below.

Abstract:
Legal and regulatory understandings of information provision miss the importance of the exploration-exploitation dynamic. This Essay argues that is a mistake and seeks to bring this perspective to the debate about information provision and competition. A general, ongoing problem for an individual or an organization is whether to stay with a familiar solution to a problem or try new options that may yield better results. Work in organizational learning describes this problem as the exploration-exploitation dilemma. Understanding and addressing that dilemma has become a key part of an algorithmic approach to computation, machine learning, as it is applied to information provision. In simplest terms, even if one achieves success with one path, failure to try new options means one will be stuck in a local equilibrium while others find paths that yield better results and displace one’s original success. This dynamic indicates that an information provider has to provide new options and information to users, because a provider must learn and adapt to users’ changing interests in both the type of information they desire and how they wish to interact with information.

Put differently, persistent concerns about the way in which news reaches users (the so-called “filter bubble” concern) and the way in which online shopping information is found (a competition concern) can be understood as market failures regarding information provision. The desire seems to be to ensure that new information reaches people, because that increases the potential for new ideas, new choices, and new action. Although these desired outcomes are good, current criticisms and related potential solutions misunderstand the nature of information users and especially information provision, and miss an important point. Both information users and providers sort and filter as a way to enable better learning, and learning is an ongoing process that requires continual changes to succeed. From an exploration- exploitation perspective, a user or an incumbent may remain isolated or offer the same information provision but neither will learn. In that case, whatever short-term success either enjoys is likely to face leapfrogging by those who experiment through exploration and exploitation.

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Hello Stigler: Google Trusted Stores, Amazon, and Price Discrimination

Hello, Stigler. Matchmaking and advertising are Google’s forte. It has upped its game. Never to leave things as they are, Google has been rolling out a trusted vendor system. I noticed the service for a company that I cannot recall. Not a good sign for the company, but then again I don’t notice Amazon third parties either. If Google can use algorithms and other options such as requiring applications by vendors to be part of a trusted network of retailers, that change could be huge. There are, however, some issues.

First, Amazon should keep an eye on this program as it might be the first one to challenge Amazon’s excellent third party system. For that to be a true threat, Google will have to find a way to protect customers. Amazon has been great, in my experience, when it comes to protecting me while I deal with sellers far away and sometimes dubious. It does not give away my credit card etc. So if a lemon is in play, Amazon covers me. I assume it takes a fee for being the broker. Google customer service may have to evolve, if it is to match Amazon. A series of online, automated loops that end up hitting walls will make me stay with Amazon. But as Google gets better at identifying good sellers and protecting consumers, the service may work well. In addition, the play should feed into Google’s foray into ecommerce. Again if it can aid in delivery and resolve poor third party service, Google could do quite well in this space.

Second, will search results be influenced by participation in the program? On the one hand, I’d love results that lead to better sellers. Heck if Amazon or eBay ratings figured into Google results and improved knowing whether an ad or listed result was trust-worthy, that’d be great. Then again, right or wrong, I expect Google watchers/haters/worriers will argue that Google has promoted results unfairly. As long as a company can go through certification, it seems that argument should fail. I imagine Amazon, eBay, and others require some level of clearance to be in their system. Regardless of purveyor, it seems systems that are relatively low-cost (or maybe free except for time to fill out forms) to join and then are monitored should be embraced. In other words, Yelp etc. are near useless to me. Crowds are not as smart as folks think. As the great agent Kay in Men in Black said, “A person is smart. People are dumb, panicky dangerous animals and you know it.” More ways to improve how each of us, separately, evaluates options would be welcome, and plays to the way we each are capable of being smart. Options that limit us and feed echoes of dubious sources, behaviors, and beliefs, I’d like to avoid.

So we’ll see whether Google can one-up Amazon in connecting buyers and sellers. If so, I may buy more LPs and who knows what from folks I will never meet. And prices should be more competitive. Of course, that will be so until Christmas hits. Then as happened this year, prices may go up. But hey, Amazon listed the MSRP and connected me to a retailer whose markup combined with Amazon shipping worked for a gift to my niece. That was great. Wait, did I just agree with perfect price discrimination?!!? Damn, you Goog! and Amazon! Or is that Happy Holidays! I got what I wanted without fighting through stores.

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Privacy: For the Rich or for the Poor?

Some consider the right to privacy a fundamental right for the rich, or even the rich and famous. It may be no coincidence that the landmark privacy cases in Europe feature names like Naomi Campbell, Michael Douglas, and Princess Caroline of Monaco. After all, if you lived eight-to-a-room in a shantytown in India, you would have little privacy and a lot of other problems to worry about. When viewed this way, privacy seems to be a matter of luxury; a right of spoiled teenagers living in six bedroom houses (“Mom, don’t open the door without knocking”).

 

To refute this view, scholars typically point out that throughout history, totalitarian regimes targeted the right to privacy even before they did free speech. Without privacy, individuals are cowed by authority, conform to societal norms, and self-censor dissenting speech – or even thoughts. As Michel Foucault observed in his interpretation of Jeremy Bentham’s panopticon, the gaze has disciplinary power.

 

But I’d like to discuss an entirely different counter-argument to the privacy-for-the-rich approach. This view was recently presented at the Privacy Law Scholar Conference in a great paper by Laura Moy and Amanda Conley, both 2011 NYU law graduates. In their paper, Paying the Wealthy for Being Wealthy: The Hidden Costs of Behavioral Marketing (I love a good title!), which is not yet available online, Moy and Conley argue that retailers harvest personal information to make the poor subsidize luxury goods for the rich.

 

This might seem audacious at first, but think of it this way: through various loyalty schemes, retailers collect data about consumers’ shopping habits. Naturally, retailers are most interested in data about “high value shoppers.” This is intuitively clear, given that that’s where the big money, low price sensitivity and broad margins are. It’s also backed by empirical evidence, which Moy and Conley reference. Retailers prefer to tend to those who buy saffron and Kobe Beef rather than to those who purchase salt and turkey. To woo the high value shoppers, they offer attractive discounts and promotions – use your loyalty card to buy Beluga caviar; get a free bottle of Champagne. Yet obviously the retailers can’t take a loss for their marketing efforts. Who then pays the price of the rich shoppers’ luxury goods? You guessed it, the rest of us – with price hikes on products like bread and butter.

 

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Stanford Law Review Online: The Money Crisis

Stanford Law Review

The Stanford Law Review Online has just published an Essay by former U.S. Senator Russ Feingold entitled The Money Crisis: How Citizens United Undermines Our Elections and the Supreme Court. Senator Feingold explains how the Supreme Court decision in Citizens United threatens the integrity of our political process:

As we draw closer to the November election, it becomes clearer that this year’s contest, thanks to the Supreme Court’s 2010 Citizens United decision, will be financially dominated by big money, including, whether directly or indirectly, big money from the treasuries of corporations of all kinds. Without a significant change in how our campaign finance system regulates the influence of corporations, the American election process, and even the Supreme Court itself, face a more durable, long-term crisis of legitimacy.

[In Citizens United,] the Court was presented with a narrow question from petitioners: should the McCain-Feingold provision on electioneering communications (either thirty days before a primary election or sixty days before a general election) apply to this movie about Hillary Clinton? The movie, of course, was not running as a normal television commercial; instead, it was intended as a long-form, “on demand” special.

Yet Chief Justice Roberts clearly wanted a much broader, sweeping outcome, and it is now clear that he manipulated the Court’s process to achieve that result. Once only a question about an “on-demand” movie, the majority in Citizens United ruled that corporations and unions could now use their general treasuries to influence elections directly. Despite giving strenuous assurances during his confirmation hearing to respect settled law, Roberts now stands responsible for the most egregious upending of judicial precedent in a generation. As now-retired Justice John Paul Stevens wrote in his dissent to the majority in Citizens United: “[F]ive Justices were unhappy with the limited nature of the case before us, so they changed the case to give themselves an opportunity to change the law.”

He concludes:

The Court has a clear opportunity. A new challenge from Montana could allow the Supreme Court to reconsider its decision in Citizens United, and at least two justices have hinted that the 2010 ruling is untenable. In granting a stay of a Montana Supreme Court decision upholding that state’s anticorruption laws, Justice Ginsburg, writing with Justice Breyer, found the pulse of the chaos Citizens United has wrought: “Montana’s experience, and experience elsewhere since this Court’s decision in Citizens United v. Federal Election Commission, make it exceedingly difficult to maintain that independent expenditures by corporations ‘do not give rise to corruption or the appearance of corruption.’”

Justice Ginsburg is correct. Today’s framework for corruption cannot stand.

Read the full article, The Money Crisis: How Citizens United Undermines Our Elections and the Supreme Court by Russ Feingold, at the Stanford Law Review Online.

Note: corrected for typos

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Innovation (as in Beer!) – The Punch Top Can and Lawsuits to Come

Yes! You can now shotgun a beer with less trouble and mess than before. I saw an ad for the new Punch Top can by Miller Light and couldn’t believe it. The claim is that the new hole is for a “smoother pour.” (see the ad below). Come on. This innovation is about shotgunnig beer. This post captures the snark

Now, it’s only been two years since the brand unveiled the “Vortex Bottle,” a seemingly useless and unnecessary bottle design feature that has somehow lasted 23 months longer than anyone expected. Undoubtedly, the success of the swirly bottle neck has influenced the powers that be at Miller Lite to carry over their brand of “science” to cans. I can only imagine what the supporting market research looks like: “In our study, seven out of 10 brospondants said that when they shotgun cans of cheap beer to the amusement and horror of their friends, they opt for Miller Lite. Of those that answered positively, four out of five said that they have been wounded by the jagged aluminum the occurs in the wake of puncturing the can with their car keys, which reportedly ‘hurts like a bitch.’”

Lawsuits ahead? Sure why not? 1. Campus and underage drinking events mean someone will get alcohol poisoning or get hurt after drinking from these cans. Of course as the industry says Drink Responsibly (and in the ad, “Great Beer, Great Responsibility (with a TM it seems, so don’t go talking about great responsibility even if you are Spiderman’s uncle or maybe Marvel will sue. Hey I found another lawsuit!); but they offered the tool, so go get ’em. Oh and other shot gun tools are available just search for beer shotgun under images in Google for an example. 2. How about a patent suit? Maybe. It seems Coors tried this innovation path a couple years ago. OK not really. It was a joke as far as I can tell. But one comment said no one would do it. And now the joke is real.

Innovation, as in beer!

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Santorum: Please Don’t Google

If you Google “Santorum,” you’ll find that two of the top three search results take an unusual angle on the Republican candidate, thanks to sex columnist Dan Savage. (I very nearly used “Santorum” as a Google example in class last semester, and only just thought better of it.) Santorum’s supporters want Google to push the, er, less conventional site further down the rankings, and allege that Google’s failure to do so is political biased. That claim is obviously a load of Santorum, but the situation has drawn more thoughtful responses. Danny Sullivan argues that Google should implement a disclaimer, because kids may search on “Santorum” and be disturbed by what they find, or because they may think Google has a political agenda. (The site has one for “jew,” for example. For a long time, the first result for that search term was to the odious and anti-Semitic JewWatch site.)

This suggestion is well-intentioned but flatly wrong. I’m not an absolutist: I like how Google handled the problem of having a bunch of skinheads show up as a top result for “jew.” But I don’t want Google as the Web police, though many disagree. Should the site implement a disclaimer if you search for “Tommy Lee Pamela Anderson”? (Warning: sex tape.) If you search for “flat earth theory,” should Google tell you that you are potentially a moron? I don’t think so. Disclaimers should be the nuclear option for Google – partly so they continue to attract attention, and partly because they move Google from a primarily passive role as filter to a more active one as commentator. I generally like my Web results without knowing what Google thinks about them.

Evgeny Morozov has made a similar suggestion, though along different lines: he wants Google to put up a banner or signal when someone searches for links between vaccines and autism, or proof that the Pentagon / Israelis / Santa Claus was behind the 9/11 attacks. I’m more sympathetic to Evgeny’s idea, but I would limit banners or disclaimers to situations that meet two criteria. First, the facts of the issue must be clear-cut: pi is not equal to three (and no one really thinks so), and the planet is indisputably getting warmer. And second, the issue must be one that is both currently relevant and with significant consequences. The flat earthers don’t count; the anti-vaccine nuts do. (People who fail to immunize their children not only put them at risk; they put their classmates and friends at risk, too.) Lastly, I think there’s importance to having both a sense of humor and a respect for discordant, even false speech. The Santorum thing is darn funny. And, in the political realm, we have a laudable history of tolerating false or inflammatory speech, because we know the perils of censorship. So, keeping spreading Santorum!

Danielle, Frank, and the other CoOp folks have kindly let me hang around their blog like a slovenly houseguest, and I’d like to thank them for it. See you soon!

Cross-posted at Info/Law.

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The Valentine’s Day Gift That Keeps On Giving

Bluemountain is a “freemium” site owned by American Greetings.  That is, it allows some free card sending and also offers a subscription for premium cards.  This card was from a subscription account and retrieved from the person who received the card.  The box above on the right lists the companies that either have placed cookies in the person’s browser in the process of loading the card, or that are checking for previously placed cookies.

The names includes some of the biggest players in cross-site behavioral advertising business.  Bluemountain’s privacy policy isn’t clear about the kinds of data these firms can learn about the recipients of its cards.  Based on what happens elsewhere on the web, one would suppose that what the firms conclude about the receiver’s card-viewing will be connected to other data about the recipient.  (Could the social connections—who sent the card to whom—also be a part of what Facebook and ClearSaleing, and other firms with social-marketing interests are after?)  Inferences about the meaning of these data can affect the ads, discounts, and other content the person gets elsewhere.  Alone the phenomenon may seem trivial.  In the context of streams of data collection, and moving into a future of increasingly sophisticated big-data analytics, it raises important social issues.

The process is transparent; your Valentine recipient wouldn’t normally see it.  This box is the result of a Ghostery application that reveals them.

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The Disconnect Between What People Say and Do About Privacy

In the course of my research I’ve been fortunate to be able to speak at length with media planning executives and practitioners.  They spend much of their time figuring out how to use data to send commercials to targeted segments and individuals online.  When the conversation turns to privacy issues, they invariably dispute that the public is genuinely concerned with the topic.  “When they respond to your surveys people may claim to worry about privacy issues,” the industry practitioners tell me. “But look at what they actually do online.  People will give up personal information just to get a discount coupon.  And look what they reveal about themselves on Facebook!  The disconnect between what people say and do shows that policymakers and academics misjudge the extent to which the public really cares about the use of data about them by marketers.”

It’s an interesting argument and one that must be taken seriously.  One response I give is that people are indeed complex, but their behavior doesn’t mean they are two-faced when it comes to privacy.  Rather, findings from national telephone surveys (conducted by me and with colleagues) going back to 1999 show that the majority of Americans are deeply unaware about what goes on with their information about them online.  They know companies follow them, but they have little understanding of the nature of data mining and targeting.  They don’t realize companies are connecting and using bits of data about them within and across sites.  They think that the government protects them regarding the use of their information and against price discrimination more than it does.  And over four surveys, about 75% of adult Americans don’t know that the following statement is false: “When a website has a privacy policy, it means that the site won’t share information about you with other companies without your permission.”

“Why don’t Americans know such things?” industry practitioners often ask me after I recite such findings.  “And why don’t they use anonymizers and other technologies if they are so concerned about leaking data about themselves?”  My answer to that typically takes the form of “people have a life.”  Learning ins and outs about the online world can be complex, and people have so many priorities regarding their families and jobs.  Too, when they go online, whether to Facebook, YouTube or a search engine, they want to follow their needs and leave.  In moments of rational contemplation they may well indicate web wariness.  But online their need to accomplish particular goals and often engage in emotional relationship-building may trump rationale calculation.  Chris Hoofnagle, Jennifer King, Su Li, and I inferred this pattern even from young adults—men and women 18-24 who common wisdom suggests wouldn’t care a whit about privacy.[1]

There is an additional explanation for people’s lack of knowledge about how data about them are treated under the internet’s hood.  Unfortunately many of the most prominent digital-marketing actors engage in a kind of doubletalk about their use of information.  It’s a consistent pattern of public faux disclosure that may simultaneously encourage people’s confidence in the firms’ activities and obfuscate the privacy issues connected with those activities.  And some of the biggest players engage in this privacy-doublespeak dance.

Consider how Google recently told its users about its decision to link information about their activities across its most popular services and multiple devices beginning March 1.  The consolidation was clearly a response to a number of developments.  Strategically, Google wanted to use its previously siloed data in ways that would be competitive to its increasing competitor, Facebook.[2]  More tactically, Google was motivated by the firm’s need to meet a European-Union directive that beginning May 1 all advertisers must obtain consent from their customers to allow websites to set cookies.  In the words of the U.K. trade magazine New Media Age, “Consolidating its multiple privacy policies, of which it has over 60, for all its accounts will mean consumers only have to give consent once for it to be effective across all Google products.”[3]

In the U.S. Google faced a major risk with the data consolidation.  The company had to know that some would see the action as violating last year’s agreement with Federal Trade Commission not to change its handling of people’s data without their explicit permission.  In fact, the Electronic Privacy Information Center filed a complaint with the FTC insisting Google’s new approach violates the deal.[4]  Perhaps to blunt such criticism, the company shouted out its new privacy regime to broad publics. For several days Google emblazoned its search page and the landing pages of its other holdings with statements such as “We’re changing our privacy policy” followed by blunt signals of seriousness—for example, “This stuff matters” or “Not the same yada yada.”  But if you clicked the link to learn more, you found essentially the same yada yada.  The urgency evaporated.  The language gave no sense that beginning March 1, to quote the Los Angeles Times, “the only way to turn off the data sharing is to quite Google.” [5]  Instead, clickers saw the comforting statement that the change was all good.  The privacy policy would be “a lot shorter and easier to read.” It would reflect “our desire to create one beautifully simple and intuitive experience across Google.”[6]

Google certainly isn’t alone in this purposefully confusing, often two-faced approach to the public.  Consider how Amazon makes it seem that its data mining is transparent with respect to its visitors.  On its landing page the firm is straightforward in letting you know that it is connecting what it previously saw of your site behavior with what others who did similar things bought.  But a trudge through the privacy policy will reveal that Amazon’s seemingly open approach to visitors’ data on the home page actually obscures a far broader and impenetrable use of their data for the company’s own and others’ marketing purposes.  Check out Pandora for a similar pattern of transparency and non-transparency in data-handling.  Or visit the Digital Advertising Alliance’s op-out area and note the disconnect between the availability of the opt-out choice and the rhetoric around it that makes its selection seem slightly absurd.

This sort of doublespeak may be endemic to the approach data-driven marketers are taking to the public.  As Wall Street Journal columnist Al Lewis recently noted, “Mark Zuckerberg says Facebook’s IPO is not about the money. But he then says it’s about creating a liquid market so his employees and investors can get their money—proving the maxim that it’s always about the money.”[7]  Such corporate “explanations” of their activities add yet another reason for the public’s failure to understand the dynamics of big data in their lives.


[1] Chris Jay Hoofnagle, Jennifer Kinng, Su Li, and Joseph Turow, “How Different are Young Adults from Older Adults When it Comes to Information Privacy Attitudes and Policies?”  August 14, 2010.  Report available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1589864&download=yes , accessed February 8, 2012.

[2] Byron Acohido, Scott Martin, and Jon Swartz, “Consumers in the Middle of Google-Facebook Battle,” USA Today, January 26, 2012, http://www.usatoday.com/tech/news/story/2012-01-25/google-facebook-competition/52796502/1, accessed February 8, 2012.

[3] “Google to consolidate privacy data to bolster ad targeting,” New Media Age, January 25, 2012.  Thanks to Jeffrey Chester for pointing out this article to me.

[4] Byron Acohido, Scott Martin, and Jon Swartz, “Consumers in the Middle of Google-Facebook Battle,” USA Today, January 26, 2012, http://www.usatoday.com/tech/news/story/2012-01-25/google-facebook-competition/52796502/1 , accessed February 8, 2012.

[5] Jessica Guynn, “Google to Expand Its Tracking of Users,” Los Angeles Times, January 25, 2012, B1.

[6] “Google Policies & Principles,” http://www.google.com/policies , accessed February 8, 2012.

[7] Al Lewis, “Facebook, Dead of  Alive,” Wall Street Journal, February 5, 2012, http://online.wsj.com/article/SB10001424052970203889904577199481841403756.html?mod=WSJ_hp_mostpop_read , accessed February 8, 2012.