Internet currency

Citation

(2009), "Internet currency", Journal of Consumer Marketing, Vol. 26 No. 1. https://doi.org/10.1108/jcm.2009.07726aag.001

Internet currency

Article Type: Internet currency From: Journal of Consumer Marketing, Volume 26, Issue 1

Edited by Dennis A. PittaUniversity of Baltimore

Privacy versus the economics of online advertising

It’s amazing how the marketing wisdom of our elders still applies in the era of Generation X-ers. Our parents believed that there was no such thing as a free lunch. Our children don’t. Instead, they know that the good things in life like e-mail accounts from Google are free. Google’s e-mail, G-mail, has become one of the most popular free mail account options for countless individuals. Its marketing model is almost viral. Using the “invitation” function, current users help spread G-mail’s reach by offering free accounts to their friends. In fact, G-mail offers some significant benefits, not the least of which is unlimited storage space and automatic archiving. Some of us with conventional e-mail accounts face space limits that constrain activities like sending digital photos. Those we send clog up our “sent” folders and eventually trigger space utilization warnings. Those warning always seem to come at the least opportune times and require deleting large image files from the sent folder. Usually, one has to also delete or empty the “deleted items” folder.

Recent advances in digital cameras make ten megapixel images more commonplace. Even with good housekeeping habits, it is surprising how quickly a traditional e-mail account can exceed its allocated space during a simple transfer of photos. What is more significant applies to the common practice of forwarding photos received by a user. Some e-mail accounts prohibit forwarding photos in received messages to preserve server bandwidth. G-mail avoids that problem. Even large file attachments are forwarded automatically without exhausting the account’s disk space.

In addition, the automatic and virtually perpetual archiving may be helpful to users. However, that process forms the basis of concerns over user privacy. If everything is saved and retrievable, who knows for what purpose the information will be used. Herein lies the problem. G-mail actively mines the information users place in their messages. The screen layout features the message on the left and the ads on the right. Those ads are directly related to the content. Thus if a message contains a reference to a passport, ads for passport services will appear on the right. During one test, the ads included the following eight sponsored links:

1. 1.

   24 Hour Passport Service (Apply, Renew, Replace or Expedite Your Passport For As Low As 79!);

2. 2.

   Expedited Passports (How to Get Your US Passport Expedited. Call Today!);

3. 3.

   Apply US Passport (First Time Passports. Reliable. Rushes Available, Rates From $45.00);

4. 4.

   Rush My Passport Today (Need your passport in 24 hours? Rushmypassport.com will save you);

5. 5.

   Replace a Lost Passport (Same Day/24 Hour Service Guaranteed. Nationwide. Since 1992);

6. 6.

   The Passport Book (Legally Obtain a 2nd Passport and Live the Life of your Dreams!);

7. 7.

   Passport Austin (Need A Passport In A Hurry? Call Our Office For Renewals & Service.); and

8. 8.

   12 Hrs Passport Children (When Trust & Time Count. Assistance 24/7 from Washington DC…).

An index for even more links appeared below these.

G-mail’s sponsored links bring it enough revenue to more than pay for the costs of the service it gives away. It is unclear whether the advertisers reap enough profits from their sponsored links but it is logical to assume that they must or they would stop.

Another threat to privacy exists with the popular Facebook personal webspace pages. Facebook is another free service. Users can sign up for free webspace to host their personal webpages. The space is really personal and users can customize it as they see fit. Moreover, they can welcome their current friends or new friends to explore it. Facebook and spaces like it have become the new communications medium for a generation of students. But, there is a dark side to the free space (Beckman, 2008). Facebook software browses through user profiles and postings to discern their interests and concerns. It then targets its advertising to users based on the information in their profiles. For marketers, this is an old concept. Even before the internet, in the days of broadcast television ads were aimed at viewers, the target audience.

The new twist is that data miners know much more about us than the old advertising media guys who constructed viewer profiles based on survey research or Nielsen data. Today’s free services seduce us into revealing much more about ourselves. For example, Facebook knows users’ birthdays, their marital status and probably their political party affiliation, and whether they think that a particular political candidate is more than an empty suit.

The technology to plumb user information existed long ago, but Facebook started turning this information into revenue last November with the launch of Facebook Ads. Facebook Ads targets users’ presumed areas of interest and wants. Thus, newly married women have been subject to ads about fertility treatments. Those who worried about being out of shape got ads aimed at weight reduction. Notably, some of them would make the typical marketer cringe. Some ads use pejoratives and scare tactics; hardly the approach that builds customer relationships.

Despite the demonstration of G-mail’s and Facebook’s ability to link text content with advertising one might wonder if the sponsors can manage the volume of links other than to display a passive list of clickable ads. Recent technological developments can harness the information and shape it into sophisticated one-to-one marketing. The development is called operational business intelligence (BI), which puts reporting and analytics applications directly into the hands of business users. Those users can leverage information to work more efficiently and improve results. For organizations like Google and Facebook, operational BI has brought data gathering and analysis to a higher level of effectiveness. The amount of increased potential revenue is staggering. As advertising becomes more focused it becomes more effective and advertisers are willing to pay more for it.

That refinement can also create new challenges. One of those challenges is a potential consumer backlash against the embedded advertising. Facebook users are reported to be more sensitive to the information they post, since it is public. However, even G-mail users, whose communications are not overtly public, are becoming more concerned (Mediati, 2008). Users of certain listservers have restricted members’ use of G-mail accounts. The presumption is that anything sensitive that is written in a G-mail message is public. Thus, grassroots discussions of political party concerns might become known to the opposition.

It is difficult for consumers to refuse to accept costly services for free. It is also likely that technology will improve over time. What will not change is the basic calculus of added inducements to consumers to use a communication technology versus innovations that reveal more about their preferences. In the long run, consumers faced with a basket of values at no cost may surrender any expectation of privacy. Alas, there really is no such thing as a free lunch.

Reader requests

Please forward all requests to review innovative internet sites to: Dr Dennis Pitta, University of Baltimore, 1420 North Charles Street, Baltimore, MD 21201-5779, USA. Alternatively, please send an e-mail to: dpitta@ubalt.edu for prompt attention.