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Reason Foundation

The Dangers of Misapplied Privacy Policies to Search, Social Media and Other Web Content

Let markets shape how consumers choose to interact with websites

Steven Titch
March 28, 2013

Most of the free, Internet-based services that consumers take for granted are supported by advertising. But while social media and other tools for consumer information-sharing on the World Wide Web speed ahead, lawmakers and regulators are doing everything they can to slow them down, pressing for more government oversight of the way websites collect and statistically analyze information to match advertising to users’ interests.

The government is contemplating sweeping steps that would place legally enforceable restrictions on how websites collect and use consumer information. This would push the U.S. toward a stricter regime akin to the European Union’s Privacy Directive. If adopted, such restrictions could present a host of unintended consequences for consumers, websites, and the overall environment of the Internet. They risk undermining Web commerce, consumer choice, and a growing base of free entertainment and information services and applications, while also damaging U.S competitiveness.

Calls for regulation also fail to account for the benefits analytics have for users. Targeted and behavioral advertising techniques help consumers identify sellers and gain more information about products, prices and differentiators that much more quickly. In addition, targeted advertising results in a more cost-effective market. Sellers can identify and serve potential buyers faster and more effectively and avoid devoting resources to more scattergun approaches. These economic efficiencies help lower prices.

Just as importantly, market forces have already forged a powerful check when companies overstep what customers see as defined privacy boundaries. Although lawmakers find this trial-and-error process cumbersome, it is necessary because user attitudes regarding information-sharing are complex—often users express concern about privacy in surveys, but then willingly share their personal information on the Web anyway. In this context, the best way to develop online privacy policies is to derive them from a strong and constantly evolving knowledge base of best practices, rather than to codify them into laws that are likely to unintentionally preclude innovation.

Overall, the case for allowing free markets to shape the way consumers choose to interact with Websites can be summarized in five points:


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