Personalization, Privacy and Local

In the spirit of the season (Halloween), the people at Consumer Reports WebWatch published a scary report about fear online: "Leap of Faith: Using the Internet Despite the Dangers."

The report, based on a telephone survey of roughly 1,500 adult Americans, finds that fears of identify theft are causing people to withhold personal information and change their online behavior.

The document reports that "four in five Internet users (80 percent) are at least somewhat concerned someone could steal their identity from personal information on the Internet. Nearly nine out of ten users (86 percent) have made at least one change in their behavior because of this fear":

• 30 percent say they have reduced their overall use of the Internet.
• A majority of Internet users (53 percent) say they have stopped giving out personal information on the Internet.
• 25 percent say they have stopped buying things online.
• 54 percent of those who shop online report they have become more likely to read a site€™s privacy policy or user agreement before buying.
• 29 percent of those who shop online say they have cut back on how often they buy on the Internet.

These findings, at a high level, appear to echo those from a July online survey conducted by ChoiceStream, which found something of a paradox: Americans want personalized media and customized experiences online, but a majority are concerned about the security of their personal information.

The ChoiceStream survey found that consumers are now more reluctant to provide personal and demographic information in exchange for personalized content. In 2005, 59% of respondents were willing to provide personal information, which was down from 64% in 2004. In addition, fewer people were willing to provide demographic data: 46% in 2005 vs. 56% in 2004.

So what are we to make of all this?

I could argue with some of the WebWatch data. But let's assume, because the ChoiceStream study also seems to confirm the trend, that it's accurate and an accurate reflection of a general mood among U.S. consumers of increasing wariness about providing personal data and online shopping (despite e-commerce's rapid growth).

The immediate impact of all this could be to dampen, somewhat, the growth of e-commerce. Over the long term, however, e-commerce is unlikely to be dramatically affected. Either way, broader Internet growth and usage (notwithstanding the WebWatch report) will not suffer.

Why?

The dominant scenario — as we and others have documented — is that the Internet is used to find local merchants (whether big boxes or SMEs): shop online, buy offline. The fear of identity theft only continues to support that phenomenon. Absent spyware, I can do all the anonymous shopping and price comparisons I please and then buy locally, without ever divulging any personal information.

To those among the traditional media set who would welcome the WebWatch findings as evidence that this whole Internet thing won't be that big a deal in the end, you need only look over your shoulder to those among the 18-to-24-year-old demographic. This is the next generation of "life events" purchasers — those who are in the process of or soon will be buying cars, finding jobs and ultimately purchasing homes (and probably getting married).

They have developmentally come of age with the Internet and aren't going to be as concerned about these issues. The Internet (and other devices such as wireless phones) are so deeply woven into their daily lives and routines that there's no question of going without.

Offline, local buying will continue to be the way most people transact even as e-commerce continues to grow over time. Yet, whatever the fate and pace of e-commerce, the Internet will only continue its ascendancy as an influence on local consumer purchase behavior.

The WebWatch findings are only a momentary pothole on what used to be called "the information superhighway."