Stronger Online Privacy Regulation Comes with Tradeoffs

Time-Techland-logoAs calls for comprehensive online privacy legislation get louder, Congress is looking to the experience of our cousins across the Atlantic where the European Union has had strict privacy regulations for over 15 years. What they’re finding is that privacy protections come with tradeoffs.

At a House hearing yesterday, M.I.T. Professor Catherine Tucker told lawmakers that her research shows that the E.U.’s privacy standards are associated with a 65% decrease in the effectiveness of online advertising. Why does this matter? Because advertising is how services like Facebook, Twitter, Gmail and the rest pay for themselves.

If privacy regulations diminish how well web services can track your interests, then it’s more difficult for them to pitch ads to you that match those interests. Advertisers are less willing to pay for ads that are less relevant to users. And that, of course, would mean less cash for the services.

For example, Twitter is right now trying to figure out how to target its “promoted tweets” to the tweet streams of users who will care (a paid tweet from Oprah’s Book Club probably isn’t relevant to a 20-year-old male football fanatic). In order to do that, it might have to keep track of who you are.

Some folks find such tracking creepy or risky, and would like to see it limited. What the EU experience shows us is what we might have to give up to have strict limitations on data collection.

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