Online Privacy: Consumers 1, Web Companies 0

Several initiatives were set in the past two days to protect consumers against private data collected by providers of browsers, apps and websites that keep personal information. Such information is used to target advertising and to make decisions about, among other things, who may have good or bad credit scores. What individuals will give up in the process is the possibility that some of the messages targeted toward them will be useful and make their online experiences more valuable.

Under pressure from the California attorney general, Google (NASDAQ: GOOG), Apple (NASDAQ: AAPL), Amazon.com (NASDAQ: AMZN) and six other firms that make apps for smartphones said they would force app makers to add privacy statements to their downloads. Privacy advocates are concerned that the app markets could use the information they collect to gather information they can use for future commercial offers.

Browser providers, which again include Google, said they would not collect person data through those browsers to target marketing messages, and perhaps, collect data that could, for instance, help insurance companies decide who should and should not get new policies. The decision was made as the Obama administration readies a seven-point online bill of rights. The method for protection in this case is a button on the browser that, when pushed, stops the collection of personal data.

At nearly the same time as the two large privacy initiatives took place, 30 state attorneys general questioned how Google collects data for its own commercial use.

The debate over online privacy is years old. The most visible battle recently is between Facebook and privacy groups. Facebook eventually was compelled to agree that it would gather less information on its users. That may have cost the social network some future revenue, because marketers pay more for carefully targeted ads.

What the consumer gives up in all of this privacy protection is the ability for markets to send valuable messages or content to that consumer. A person who goes to discount brokerage sites or financial sites, or who seeks discount brokerage information via a search engine, may welcome discount broker messages. Of course, that same person may not want his credit score disclosed to a retailer, so the line between what is collected and what is not is unclear.

The privacy battle has been won, at this point, by the government and groups that seek to keep confidential data confidential. The argument made by activist groups is that they are acting on behalf of consumers who do not want the data collected. But there has  been no consumer uprising about the practices. So how much does the public care at all? The privacy guardians would say that what the consumer does not know can hurt him. That is true, up to the point that what is private may help the consumer to see what is useful to him, whether it is on a PC or a smartphone.

Douglas A. McIntyre