How Much are We Willing to Pay for Online Privacy?

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In spite of growing incursions into online privacy, the protection business has been a no-go at least since 1999, when Zero-Knowledge Systems offered anonymous email and web surfing. That lasted less than two years. Anonymizer is a privacy service that's doing very well, but its president, Lance Cottrell admits that 80% of his company's revenue comes from commercial customers, not individuals.

Another CEO, Michael Fertik of startup Reputation Defender, says that his service isn't offering anything that people can't do for themselves. His company offers "the economies of scale, technology and expertise to do it for them." And what he offers is the ability to control how your personal data is used. Are people willing to pay for that? He's betting on it.

But a recent study by Carnegie Melon and the University of California, Berkeley paints a less optimistic picture for privacy marketers. Most of the people who were interviewed said that they wouldn't be willing to pay anything to keep their information private, not even the most sensitive data such as their weight or sex habits.

Cottrell says. "The thing about consumer privacy is it's really a death from a thousand cuts." True enough, but can privacy services really provide all the protection that they claim to offer? Jennifer Barrett of Acxiom, a large data broker, doesn't think so. She says that when people pay for such a service, they expect universal opt-out. But "it would be difficult for any company to claim they can really opt you out when they can't go back to the source and take you out of the public record,"

Fertik argues that the goal is to lower your online profile, to build a wall around your information that will make it more difficult for identity thieves or stalkers to find you. It may not reduce the onslaught of spam very much, but the purpose of privacy services is safety, and that's becoming more important as government and industry make deeper forays into the web's store of personal information.

He thinks it's significant that 130 million people signed up for the Federal Trade Commission's "Do Not Call" list, and seems certain that enough of those people would be willing to pay a monthly fee for privacy to make his business "absolutely zero risk."

It's a gamble that may work out for some companies, but the web changes constantly, and sometimes those changes obsolete a whole market sector in one swipe. Just this summer, Ask.com added a tool to let users delete their search histories; Google and Yahoo reduced the length of time they keep IP addresses and search logs, and Microsoft improved privacy controls for Windows Live. The market value of privacy can only become more valuable, which means that it will be increasingly worthwhile for businesses and web sites to offer it without cost to their customers.

As people become more knowledgeable about the web, they take their own steps to protect themselves. They're learning not to open suspicious mail, or put private information on public sites. They watch for https:/ and the lock symbol on pages that are supposed to be secure. They give false registration information on sites that intrude too much. They use browser tools that allow you to block cookies from selected sites, and they delete undesirable cookies long before they expire. On the web, knowledge is viral, and free for the taking. Personally, I wouldn't invest in the privacy market.