Copyright © 1995 by Nick Szabo
October 25, 1995
Most Internet businesses, especially the Web software and
payment systems providers, are severely underestimating the market
for privacy features that is out there. Consider:
A recent general survey showed that 83% of Americans are very
concerned about their privacy on the "Information Superhighway". One
can expect even stronger figures from European customers, which have
more first-hand experience with private data, much of it originally
compiled for innocuous reasons, being used for political repression.
The vast majority of our customers are concerned about privacy.
Marketing surveys on privacy that are both detailed and accurate are
hard to come by, because customers who care more about their privacy
tend to dislike filling out detailed forms (even if they claim to be
Over half the BBS, and potentially the Internet, online service
market is in controversial services, where customers are even more
concerned about privacy than average.
Privacy, once considered merely a political issue, is now being
recognized for its more important aspect, as a market differentiator
and value-add. Marketers correctly recognize that government
"privacy regulations" mean much less privacy for businesses if it is
to be enforced, and the voters no longer expect such laws to have
any teeth in the face of modern technology. That hardly means that
customers are not concerned about it, as the numbers show.
The alternative to regulation is market solutions. Recognize that
many customers do want privacy, give them what they want, and
contrast yourself to your competitor. Making visible the ways your
competitor is violating their customers' privacy will become a
powerful marketing strategy. This strategy was used rather timidly,
and inaccurately, by AT&T against MCI, where it nevertheless had
great success. (Inaccurate because all major phone companies
compile lists of who calls whom, and use them for marketing as well
as billing -- MCI was simply being more honest about it). Used
boldly and accurately, privacy marketing has vast potential to upset
competitors who rely too much on marketing data and not enough on
empathy with the human customer. For an idea of what such a
marketing campaign might be like, imagine combining Apple "1984" Mac
ads, one of the most effective campaigns in history, with the AT&T
vs. MCI campaign, to sell products and services that in fact do
protect customer privacy where the competition does not.
Most Americans do not participate in frequent flier and
similar customer tracking programs. Many who do participate don't
realize the extent to which their lifestyle is tracked, since these
actions are performed on remote databases, well hidden from the
customer. If customers aren't concerned about their privacy, then
why the need for all the distracting gimmicks and giveaways? Why
not just promote these programs straightforwardly to the customer as
"Customer Tracking Programs"? A competitor who can provide a
privacy protecting solution can do just that, damaging these
tracking programs severely.
It is ludicrous to argue that cash transactions, which leave no
identified paper trail, provide no practical privacy. In fact they
prevent detailed compilation of lifestyle habits, by (a) not
depending on identity to settle the transaction, (b) making identity
tracking, where it occurs, a visible, separate process, and (c)
making it too expensive to track identity via the payment system
itself, except in extreme, very rare cases. In practice, this means
that cash customers don't get their lifestyles described in detail
in remote databases, while non-confidential electronic payers
increasingly do. Eventually this sharp difference in outcome will
feed back to the customer, greatly increasing the demand for cash
over non-confidential electronic payment.
A big challenge for vendors value-adding privacy is to accurately
communicate these privacy features, through both the user interface
and their marketing, while debunking fraudulent claims (such as
calling non-confidential payment systems "cash") and exposing the
privacy violating actions of their competitors.
I conclude that privacy marketing will be an important value-add for
Internet commerce. It will be a terrific way to gain market share at
the expense of the competition -- or to lose much of your market share,
if you find yourself on the wrong end of a privacy campaign.
Nick Szabo, email@example.com
Consultant, Internet Commerce & Security
IBM, Sequent, DigiCash, Agorics
Nine years experience on the Internet
[ TBTF for 1995-11-03 ]
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