NCPA - National Center for Policy Analysis

Web Offers Privacy And Personalized Services

April 30, 2001

While the private sector is developing innovative products and voluntary standards to meet the privacy concerns of consumers in e-commerce, experts say government actions pose a greater threat to personal privacy. Legislation to regulate privacy on the Internet may stifle competitive innovations, while leaving the government free to roam.

Two dynamic Internet software industries are emerging. One is data-mining, which produces software to analyze Internet consumer behavior and preferences. The other is privacy software, which stops individual information from being collected and analyzed.

Information collection is accomplished primarily with "cookies," little data files saved to an Internet user's computer when the user visits a Web site. Cookies store information about the sites the consumer visits, and allow sites to tailor their offers based on that information.

  • For instance, return visitors to the Web site see books recommended based on past books they have considered or purchased.
  • software remembers which movies have been rented by its customers, and suggests movies its software determines users might enjoy.
  • Analytics, e-marketing and personalization software enable firms to identify consumers' traits and adapt their Web sites to their interests and preferences.

By contrast, when U.S. inspectors general began auditing government Web sites, they found dozens of violations of administration privacy policies. And despite detailed privacy regulations in the European Union, the Wall Street Journal notes that "Internet users' privacy is better protected in the U.S. than in Europe, despite the raft of privacy regulations that have been approved by the European Commission over the past five years."

Furthermore, "The U.S. model of voluntary self-regulation of the use of private data collection online appears to work better."

Source: Gregory F. Rehmke (Foundation for Economic Education), "The Evolving Technologies of Internet Privacy," Policy Backgrounder No. 156, April 27, 2001, National Center for Policy Analysis.

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