Why Advertisers Want You to Stop Worrying and Love the End of Privacy

(MoneyWatch)  It appears to be slowly dawning on people -- and perhaps even on Congress and the FTC -- just how much personally identifiable information advertisers collect about us, and how that information can be used or abused. So advertisers are busy dreaming up new arguments to leave the status quo in place. Their latest effort is the idea that a lack of privacy is somehow good for consumers because companies can serve them better, backed up with the notion that if privacy advocates prevail it will threaten the future of business on the Web.

Most people still don't know that advertisers can figure out if you're gay just by looking at your Facebook page, even if your page doesn't say so, by performing an analysis of links to your friends. Or that advertisers can identify you by reverse engineering your identity from anonymous lists of Netflix rentals and ratings that you've made. Or that you give up a huge key to your online privacy simply by filling out the date of birth box correctly on web sites such as Facebook.

Advertisers are hoping to stave off privacy legislation by volunteering to not abuse the vast troves of data they collect about us -- an effort that will surely fail, because history shows that if there's one thing that advertisers can't resist, it's temptation.

Companies like Aperture, a division of Datran Media, combine offline data collected by old-fashioned market research houses such as Experian and Nielsen, to create cookies that represent individual consumers, albeit with the individually indentifying information stripped out, according to Ad Age.

By merging offline data with online data, advertisers no longer need you to fill out a form telling them who you are. They already know who you are, and they want to drop a cookie onto your computer that will serve relevant ads to you wherever you go.

There's a good, if complicated, explanation of how this works in Jeff Chester's recent column on MediaPost.

The trade press, which previously regarded the End of Privacy as a neutral business development, has recently woken up to the idea that consumers may not want to be spied upon the whole time. In an editorial, Ad Age suggests that to stave off legislation that would give consumers privacy rights, advertisers must practice voluntary restraint over how much they glean about us. Google (GOOG), for instance, just announced that it will allow users to opt-out of some of its tracking practices.

The problem with all this is that voluntary restraint does not work in advertising. If one company declines to "go there," it simply leaves open an opportunity in the market for a rival to jump in.

Already, the pro-advertiser crowd is trying to frame the argument to suggest that if consumers don't give up their privacy then the future of business is at stake. Here's Paul Suarez of PC World:

Sure, more privacy always sounds great from a user standpoint, but analytics tools typically are used to the benefit of consumers whose privacy is being "violated."

... Allowing users to opt out of Google Analytics monitoring could prevent companies from understanding how long users are spending on their sites, where they are coming from, and what they are looking at. Ultimately it could prevent sites from becoming more profitable and offering users more of what they want.

Here's an idea that could both protect consumers and businesses: If this info is valuable, then companies surely wouldn't mind paying indivdual consumers from whom they collect it. In such a transaction, companies get their data, consumers get compensated, and there's no mystery as to whether the consumer is being tracked. Anyone who doesn't want the money could opt-out.

Related:

• Ad Age Weighs In on the End of Privacy -- It's All For It