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$26 billion-a-year by 2011, the internet advertising market is lucrative to venture capitalists who want to invest into companies that help target online advertising. Between 2007 and 2010, venture firms invested $4.7 billion in 356 online-ad firms. "Its a huge market and it's growing," Chris Fralic at First Round Capital says. Fralic's company has backed 33Across, which analyzes users' social networks, and Demdex, which has a "behavioral bank" of user profiles. Ethically, user on-line privacy is at issue. I contend that user privacy can be protected from dangers of concern to users while willing users can benefit as consumers from information regarding products that they want and would not otherwise know of.

According to The Wall Street Journal's "What They Know" report, the top fifty American websites installed thousands of "cookies" and other tracking technologies on people's computers in 2010. The purpose was to create sophisicated dossiers on people's personal activities and to track them in real time. At the end of 2010, the U.S. Federal Trade Commission urged the creation of a "do-not-track" system and the Obama administration backed an online "privacy bill of rights." At the same time, the EU and its states were grappling with the same issue.  One issue there was whether a user simply turning on his or her computer and going online constituted consent to "cookies."  The relative lobbying power of the industry with the vested interest could be seen to differ between states (e.g., Britain and France).  In other words, governmental restrictions can not necessarily be counted on to protect privacy and thus obviate the ethical problem. Accordingly, I now turn to an ethical analysis, putting the question of government regulation aside.

As of 2011, Americans spend 28% of our media time online. Also, online-ad start-ups do not require a lot of money relative to start-ups in other industries. Many of the online ad start-ups attracting funding connect website operators with advertisers who want to capitalize, according to The Wall Street Journal, "on the Web's ability to target individual users." According to Nick Sturiale at Jafco Ventures, "Advertisers want to buy individuals." We are bought, in other words, by being targeted even in our social networking. In short, in going to where people are, there is a lot of money to be made by bringing ads to the people most likely to buy from them. To be sure, consumers benefit when they are made aware of products of particular benefit to them. In business terms, connecting people with products they want is like water going downstream: money is naturally to be made, so it will.  Hence even government-constructed channels or dams are apt to be subtly worked around as money-seekers inevitably seek out sources in more efficient ways. The ethics of privacy do not translate except if there is a financial backlash from actual or potential consumers spurring the ads (i.e., voting for privacy with their wallets and purses). I suspect that few users will spur online ads, however. First of all, consumers who would like to buy a new product tailored to their interests may not all object to the loss of their privacy. Enabling users to allow or disable cookies would allow consumers to make this decision. Secondly, users may not object because the fact that they have been researched and targeted is not typically transparent to them when no one uses the information against them in particular. The loss of privacy is abstract where one has no knowledge of it happening in real time and one does not feel harmed. Indeed, where such breaches are widespread, the use of the data uncovered is routinized and contained.  For example, if a given user's search of porn sites is just one among millions, the individual user can have comfort in the relative obscurity of numbers.  However, what if a potential employer gains access to such information?

The danger with respect to privacy could be if a business shares its "behavioral bank" with organizations with an interest in a particular user.  Such use would not be necessary even in the case of users who want ads tailored to their particular interests. Someone who regularly watches porn might want to know if there is a new sex toy on the market, for example. But should a potential employer such as Walmart be able to access a "behavior bank" to gain personal information on people who have applied for employment?  What if Walmart owns the company that has the bank?  Would not the information then be the property of Walmart?  Furthermore, what if an agency of the federal government were to cite national security to gain access on particular users? Privacy concerns are really oriented to such access concerning particular individuals, typically by third parties, rather than to marketers using pooled data to further segment markets. Legislation ought to be focused accordingly.

In terms of ethical theory, "buying" and "targeting" online users so as to gain and use information that they regard as private violates Kant's "Kingdom of Ends" version of his categorical imperative.  For those of you who have lives and thus do not read Kant, the principle here is that people, being rational beings (i.e,, having the capacity to use reason), should be treated not just as means, but also as ends in themselves. This principle limits exploitation or manipulation of others because using them should not violate treating them as ends in themselves. The reason Kant says for the "ends in themselves" comes down to reason itself having absolute value because we use it to assign value to things.  Just as the sun is the source of light in our solar system, reason is the source of value, according to Kant.  As the source, reason must have absolute, or undefined, value. Incidently, when I get on a topic like this--boiling Kant down and applying his principle to a real-world topic--I think of possibly teaching in spite of my multidisciplinary background (which does not jive well with cubbyholes). Anyway, the rational beings at the online advertising firms seem to be ignoring what the rational nature of online users entitles--specifically, to be treated as an end in oneself rather than merely used.  To be sure, using others is not entirely blocked, as long as it is consistent with treating others as ends in themselves.  In the present issue, users who do not want to be tracked even though that could mean they do not get an informational benefit as consumers are not treated as ends in themselves if they are tracked anyway. We might call it a "boundry issue" on the part of business managers.

In abstract terms, selfishness and greed can prompt a rational being to treat oneself as an end in itself while treating other people as objects. I suspect that this is the root complaint against business managers: that they view humans exclusively as resources while in the role of manager. The problem is that greed is like water running downstream to find wealth below, so an ethical obligation or duty to go around ends in themselves can easily be ignored. Normative constraints do not compute in the business lexicon of greed. I find that people outside of business tend to erroneously project moral principles onto the restricted technical domain of cost/benefit analysis in business. Hence moral claims are made and perceived to be ignored, and a business climate can become toxic. Hence, legislation is typically sought by the general public, even though that route cannot mandate treating others as ends in themselves. We settle, in other words, for temporary dams tantamount to an ethical injunction. In the end, for being moral beings, we humans are remarkably immune to our own nature in the pursuit of what we perceive as our own interests.  In terms of privacy and online data on users, interests particular to a given firm do not recognize "personal boundaries" even as the latter have become salient in modern society. In other words, besides business ethics, business and society comes into play, and of course business and government tends to be the domain in which force or power swoops in to mop up the mess, albeit with thumbs and externally only.


Source: Scott Thurm, "Online Trackers Rake in Funding," The Wall Street Journal, February 25, 2011, pp. B1-2.

See my related essay on the regulation of cookies in the EU: http://thewordenreport.blogspot.com/2011/02/business-and-european-integration-case.html

In 2010, the EU Parliament passed a law to protect consumers in using the internet from “cookies,” which track computer usage and can thus compromise privacy. The EU’s 27 states had to codify the new law, but it was feared at the time that each state “might interpret the law differently, creating a nightmare of conflicting standards.” According to John Vassallo, Microsoft’s legal counsel in Brussels, “In the end, what matters is harmonized rules across Europe.” Ironically, it was the lobbying by Europe’s Internet-advertising industry group that led to the wiggle-room in the EU law that could spawn different state interpretations and implementations at the expense of European integration. Britain, for example, was expected to go along with the industry’s interpretation in which a browser’s settings that allow cookies would count as consent by the user. The French state Assembly, however, was leaning toward requiring that a browser ask the user upfront whether to accept future cookies. In this difference—in which the internet advertising industry preferred Britain’s approach—the “strong state / weak state” distinction can be seen. That is, the French legislature was more resistant to the influence of the industry that had a vested interest in the law.  As an aside, it can be noted that for that industry to lobby constituted a conflict of interest.

In terms of European federalism, the interest of big business in political consolidation at the EU level can be seen. At the same time, the influence of business in pulling some state governments away from a strict interpretation of an EU law not friendly to business can also be seen. Overall, the impact of big business is probably toward more governmental sovereignty being transferred to the EU (at some point being at the expense of the innate diversity within the EU).

In terms of the “cookie” law in particular, EU’s federalism seems well-suited, given the uncertainty involved in how to protect consumers on the internet. In general terms, a general law allowing a certain extent of diversity in application may be preferable to a US-style “one-size-fits-all.”  This is especially so in an empire-scale federal system such as the EU or US wherein diversity is inherent.

Source: “EU Chews on Web Cookies,” Wall Street Journal, November 22, 2010, pp. B1-2.

See my related essay on the regulation of cookies in the US and application of ethical theory to the topic:
http://thewordenreport.blogspot.com/2011/02/online-privacy-and-advertising.html