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December 2008

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Social Networks Damage Control


by Glen Emerson Morris
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It's always a good time for us to consider what the effects of imminent political changes might be on the advertising and marketing industry. Social network based political organizations have become a major player in politics, and they will prove very tough competition for any industry's lobbyists to defeat. There's no question much more regulation of business will become standard, it's just a question of how much and what kind.

One of the key issues for the advertising and marketing industry is how far reform will go in the area of privacy. The collection, sale and use of vast amounts of data about consumers is an essential part of e-commerce, but all of that could be threatened by the new balance of power.

As a power group, social network empowered consumers collectively have enough clout to demand and get privacy laws far stricter than currently on the books, especially in all things concerning the Internet. It is difficult to estimate at this point how far the pendulum will swing towards stricter privacy laws because many of the excesses of the past era have not yet come to light. Some will though. And some already have.

In fall of 2008 Business Week magazine ran a story about how a couple of companies have been buying prescription information from WalMart and other companies' pharmacies and selling the info to the health care insurance companies. The info is then used to screen applicants for health care policies. The health providers reject applicants whose history of prescriptions indicate they might cost the health provider more than would provide for a nice profit margin.

This is just one case of many with a common theme, information collected about a consumer is not only used to market things to that consumer more effectively, the information is also used to determine what kind of risk the consumer could be to the company, something that may not be in the consumer's interest at all. It may not be in some businesses' interests either.

In another case, a credit card company was found to have raised the interest rate of anyone who used its card to buy re-treaded tires. Of the many issues involved here is what effect this could have on the re-treaded tire dealers involved, and their livelihood. Any way you look at it it's not good for the dealers, who may find not only that their sales are down, but the local social network citizens are boycotting them, too. And what about the consumer? Should they have the right to know the consequences, the rules they will be judged by, in order to make intelligent and cost effective choices? Enough of them may think so that the laws change.

Consumers are increasingly finding that their ability to get credit, or a good interest rate, or even a job at the local fast food shack, may depend on information about them in databases they may know nothing about, and may be completely unable to challenge or correct information in. It wasn't planned to be this way. It's just the inevitable result of the American approach to privacy.

A basic tenet of business in America is that information about a consumer and their buying habits belongs to the businesses that collect the information, and not to consumers. American businesses are free to sell any information about their customers to any other business offering the right price. American businesses are also generally not responsible for any inaccuracies in consumer data or any damage it may cause.

As many consumer privacy advocates are fond of pointing out, this is not the way it is in Europe. There, consumers are considered the legal owner of their personal information and cannot be required to share personal information as a condition of doing business. If a law like Europe's were to pass in the United States it would put a number of Internet advertising services out of business very, very quickly.

In Europe, privacy laws are seen as an essential check on the power of large corporations, and for good reason.

One of the major problems with capitalism is that it concentrates capital so highly that little can stand up to its corrosive effect, especially politicians and corporate executives. With corporations, humanity created an artificial intelligence capable of bribing its way out of nearly any social, political or economic disaster it could get itself into. And while the major corporations got their way in Washington, the hundreds of thousands of small to midsize businesses that actually provide most of the jobs, goods and services in the county got very little from Washington except a ton of regulations and even more taxes.

Not surprisingly, a large number of Americans have come to see their government and their corporations as both corrupt and predatory. Much of the reform to be fought out in Washington will concern these issues, and there will likely be major changes. However, Americans still seem to have respect and goodwill towards the small to midsize businesses in their daily lives, the coffee shops, garages, salons, restaurants, laundries, and hundreds of other locally owned and operated businesses. Damage control will be easier for these businesses than for the large corporations now in disgrace, but success will only come if an effort is made.

At the very least, every small to midsize business in America should consider having its own page on every social network they can find. The younger generation, and many in the older generations, are demanding an interactive relationship between themselves and anyone they hand money or power to. A presence in the social networks will show your company not only cares about your customers, you talk and listen to them too, but even more needs to be done.

Small to midsize businesses need to organize much the same way that consumers will be organizing and descending on the new territory of Washington's cyberspace. There are enough small to midsize businesses to have a significant influence in Washington if they organized, and a coalition between consumers and small to midsize businesses could prove a winning combination. Loosen up the regulations on small to midsize businesses and tighten up the regulation of large corporations and you just might have a viable, sustainable, economy.

And God knows, at this point, we could really use a viable, sustainable, economy.

Glen Emerson Morris was recently a senior QA Consultant for SAP working on a new product to help automate compliance with the Sarbanes-Oxley law, an attempt to make large corporations at least somewhat accountable to stockholders and the law. He has worked as a technology consultant for Yahoo!, Ariba, WebMD, Inktomi, Adobe, Apple and Radius.





Copyright 1994 - 2008 by Glen Emerson Morris All Rights Reserved


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