Monday, March 5, 2001

Companies Need Better Privacy Approach

The location-privacy issue sparked by new wireless technologies is only the beginning of a broader privacy revolution. According to a new report from Forrester Research, Inc., companies are facing mounting customer anxiety and a growing labyrinth of US and foreign regulation. To survive, they must institutionalize their commitment to protect and manage their customers' privacy by taking a comprehensive, whole-view approach to privacy.

"Anyone who thinks the privacy issue has peaked is greatly mistaken," said Jay Stanley, analyst at Forrester Research. "We are in the early stages of a sweeping change in attitudes that will fuel years of political battles and put once-routine business practices under the microscope."

Wireless location-based services will increase the volatility of the privacy debate. Mobile devices extend the step-by-step tracking practices of the Internet to the monitoring of individuals' movements in the physical world. Only 6% of North Americans have a high level of trust in how Web sites handle their personally identifiable information (PII), and seven in eight express interest in legislation protecting Internet privacy.

Existing legal protection of location-data privacy also falls short, further heightening consumer security concerns. While carriers tout support for federal regulation, they are pressing the FCC for a vague interpretation of "opt-in" that lets them secure consent in the fine print of larger documents like service agreements or on-screen "click-wrap" agreements. This obfuscation -- and the FCCs likely partial support of it -- only inflames consumers' privacy fears.

"Wireless is the next battle. Successive waves of new technology and the growing complexity of privacy regulations will keep the privacy issue from going away," added Stanley. "Privacy will become the main countervailing force against the Information Revolution and its radical effects on the free flow of data."

In response, companies must take a whole-view approach to privacy. First, firms must recognize privacy as a core business issue that, together with customer relationship management (CRM) strategy, dictates how customers are treated. Then, firms must conduct a top-to-bottom reassessment of their policies, practices, and exposure on the privacy issue.

Companies must name a high-level person to orchestrate the effort to tackle the issue -- a chief privacy officer (CPO). The CPO should be accountable on privacy issues, have a broad view on how the company operates, and have the clout to stop dangerous activities.

Companies must then assemble an accurate and comprehensive picture of their existing information practices. This is the most onerous step toward a systematic approach to privacy. It requires a top-to-bottom assessment that reaches across divisions and business partnerships to document fully what information is being captured, how it is being used and secured, and how it complies with existing regulations.

Once a company has charted its current information flows and areas of exposure, the next steps are to decide on a companywide privacy policy, and implement processes to maintain and enforce that policy on an ongoing basis. A company with a mediocre privacy policy is part of the pack today, but companies that endure the rigor of a top-to-bottom privacy transformation will increase their credibility across the board.

For the Report "Surviving The Privacy Revolution," Forrester spoke with legal, academic, and industry experts on the issue of consumer privacy, as well as 20 wireless application developers, content providers, and carriers.

Consumers Spent $3 Billion Online In January
The National Retail Federation (NRF) and Forrester Research, Inc., in conjunction with Greenfield Online, today announced the results of the latest NRF/Forrester Online Retail Index. According to the 13th survey in this monthly series, total spending on online sales decreased from $6.1 billion in December to $3 billion in January. The number of households online dropped from nearly 20 million in December to 13.3 million in January. They spent an average of $228 per person in January, compared with $308 in December.

Toys and videogames experienced the largest decrease, falling from nearly $600 million in December to $125 million in January. Food and beverages, flowers, jewelry, and apparel also experienced significant declines. Consumers spent $88 million online in January on food and beverages, down from $336 million in December. Online sales of flowers dropped to $36 million in January, from $107 million in December. Jewelry diminished to $62 million in January from $179 million, while apparel fell to $178 million in January from $501 million.

"The 50% decline in online consumer spending in January is exactly what we would expect of the post-holiday season -- not a reflection of how consumers feel about shopping on the Internet,"said James L. McQuivey, research director at Forrester. "Being able to shop for deals anytime in a bathrobe from the couch will keep the online shopping industry alive and kicking for as long as there is a World Wide Web."

"These numbers reflect the evolution of the online shopping channel, which is developing its own unique cycles," said Tracy Mullin, president and CEO at NRF. "Online retailers increased understanding of these cylces will allow them to better tailor their businesses to satisfy their customers, which will in turn allow for continued overall growth."

News Tidbits (appears every day on the front page)
- It looks like the process for obtaining new domain extensions has been delayed by several months. Originally scheduled to be released the summer, the seven new domain extensions have been delayed for a period of "several months" that could push the process into 2002 before Webmasters can register new names with the extensions.