Posted on 14-4-2002

Profit Before Privacy - The Heart Of Spam
by Alan Marston drawing on article in NY Times by Saul Hansell

In pursuit of elusive profits more and more Internet companies are selling
access to their users' postal mail addresses and telephone numbers, in
addition to flooding their e-mail boxes with junk mail. Junk mail has
surpassed viruses as the main scourge of the use of email communications
(still the most used Internet service) and instead of Internet companies
doing their best to prevent it, some are adding to the problem by
profiteering on their clients private contact details.

I suppose it's a holier-than-thou attitude to say that at the heart of
PlaNet is respect for the individual, and at the heart of that is keeping
trust with people's personal information. So be it. The day PlaNet profits
from people's privacy is the day it will have to change its name to reflect
a change in its nature.

The most recent seller of souls is yahoo.com The vast Internet portal, just
changed its privacy policy to make it clear that it has the right to send
mail and make sales calls to tens of millions of its registered users. And
it has given itself permission to send users e-mail marketing messages on
behalf of its own growing family of services, even if those users had
previously asked not to receive any marketing from Yahoo. Users have 60
days to go to a page on Yahoo's Web site where they can record a choice not
to receive telephone, postal or e-mail messages in various categories.
Similarly, when Excite, another big Internet portal, was sold in bankruptcy
court late last year, the new owner asked Excite users to accept a privacy
policy that explicitly allows it to rent their names and phone numbers to
marketing companies. Those users, too, could check a box on the site to opt
out of such programs, if they had not already done so on the old Excite.

Facts are stubborn things, and that simply encourages the PR machine to go
into overdrive. The sites say that direct marketing to their users, both by
e-mail and by older means, is an important source of revenue that can help
make up for the rapid decline in sales of online advertising. "It has been
our orientation from the beginning to be straightforward with the user,"
said Bill Daugherty, the co-chief executive of the Excite Network. "They
are getting free content and utility that is unparalleled, and in return we
will be marketing products to them." But even many marketing experts say
that the risk to the reputations of these companies may outweigh any
revenue they may receive. "What Yahoo has done is unconscionable," said
Seth Godin, Yahoo's former vice president for direct marketing. "It's a bad
thing, and it's bad for business. They would be better off sending offers
to a million people who said they want to receive a coupon each day than to
send them to 10 million people and worry about whether you have offended
them by finally going too far." While at Yahoo, Mr. Godin published
"Permission Marketing" (Simon & Schuster, 1999), which argued that
marketing messages should be sent only to people who ask to see them.

Spin is in. Both Yahoo and Excite say they are not loosening their privacy
policies, just making them more explicit. In the past, both companies
simply asked users to check a box authorizing the Web sites to "contact"
them with marketing messages. The sites assert that such wording did not
rule out mail and telephone contacts in addition to e-mail messages.
Privacy experts say such a legalistic interpretation of the privacy policy
is at best misleading because, in practice, almost all contact from the
sites has been by e-mail. "It's unfair," said Mark Rotenberg, executive
director of the Electronic Privacy Information Center. "People thought they
were going to get e-mail solicitations. They didn't expect that their
dealings with Yahoo would cause them to receive phone calls." Both Yahoo
and Excite say they have not actually used users' phone numbers for any
marketing programs so far and have made relatively few mailings to members.

Other sites have been much more liberal in renting customer names. America
Online, the biggest Internet service, has long rented customer addresses,
and it also calls users to promote its services and those of its business
partners. Lycos, the big Internet portal, and CNET's ZDNet, a technology
site, also rent users' names through mailing-list brokers. For example,
Direct Media, a mailing list broker in Greenwich, Conn., offers access to
2.9 million Lycos users at a cost of $125 per thousand names for a single
mailing. (An extra $15 per thousand lets marketers select users showing an
interest in a topic like cats or gambling.) Advertisers typically pay for
the right to send a single mailing or make a single phone call to a name on
a list they rent; they do not own the information outright.

Stephen J. Killeen, the United States president of Terra Lycos (news/quote
), the parent of the Lycos portal, said mailing list rentals were a small
but growing part of its marketing revenue. It does not yet rent phone
numbers, a service that has a smaller market. "We look at ourselves as a
way to match the right consumer with the right product, whatever the
medium," Mr. Killeen said. "A lot of advertisers are looking at the
Internet as part of integrated marketing campaigns." The privacy policy of
Microsoft (news/quote )'s MSN portal lets it send mail and make phone calls
to customers on behalf of advertisers, but it has yet to do so. Microsoft
lets users specify whether they do not want marketing via e-mail, postal
mail or phone. "We value our customers' privacy," said Brian Gluth, a
senior product manager at MSN, "and we have never changed a customer's
preference of opt-in or opt-out, like some of our competitors have done."

In many ways the Internet is simply joining the mainstream of American
business, where the names of people who subscribe to magazines and who buy
from catalogs are freely traded. Steven Sheck, the president of Infinite
Media, a mailing list broker in White Plains, said he was seeing an
increase in the number of Web sites renting access to users' names. "Given
the state of the economy," he said, "Internet companies are looking at
their customer lists as an asset with which they can generate revenue."

Spinning out. Yahoo says its move to send mail and make calls to users on
behalf of advertisers is far more limited than simply renting its customer
file to companies with no relationship to Yahoo. It compares itself with
American Express (news/quote ), which has long sent offers to cardholders
for its own services, like insurance, and for those of other companies,
like airlines and department stores. "To the extent we have been
successful," said Lisa Nash, Yahoo's director of consumer and direct
marketing, "it's because we have been extremely respectful of our users'
time. We fully plan to continue that." She said the company had no
immediate plans to start telemarketing programs, but she added, "We intend
to have maximum flexibility. "We believe in the products and services we
offer," said Srinjia Srinivasan, vice president and editor in chief at
Yahoo. "Our network has grown so much we want to tell users about them."