Because of these fears, consumers seem to have a desire for some sort of safeguards, but are unsure of whether the government should enact regulation or if the industry should just be left to regulate itself. Since 1990, the consumer demand for government privacy regulation has grown from 23 percent to approximately 60 percent (according to surveys by Forrester Research, MB Interactive Privacy Survey, Privacy & American Business and Yankelovich Monitor), and support for self-regulation varies from 67 percent in 1996 (Equifax-Harris Consumer Privacy Survey) to 69 to 80 percent in 1998 (Privacy & American Business) and 55.4 percent in 1999 (MB Interactive Privacy Survey). 

And consumers indicate that regulation could impact their e-commerce behaviors. According to an April 1999 Jupiter Research survey, 14 percent of consumers would trust sites more if they were subject to privacy regulation.

The Benefits of Cookies

Despite their fears of how their private information will be used, 78 percent of consumers indicated in an April 1999 AT&T Labs study that they agree with the use of identifiers (such as cookies) to provide a customized service (personalization). And a CyberDialogue January 2000 survey found that 88 percent of consumers think providing information to personalize a Web page is the best way to learn about consumers. 

However, more than one-third (37 percent) of users indicated in this same survey that they think providing information to personalize a Web page is an invasion of privacy, clearly showing that the market is segmented between those who approve and disapprove of the use of cookies. 

It's likely that most American's have no idea what a "cookie" is when asked. The technical complexity of cookies would require a better understanding before making a reasonable, "educated" answer to surveys like these. Hence, to complete a lengthy study or survey, it's likely that those respondents who support the use of cookies in the surveys above were also provided a short definition and explanation of a cookie and its beneficial uses. This is more information than most Americans are given. In other words, the data above may be representative of Americans, however an educated sample, reasoning that most Americans are likely uneducated to the cookie dilemma. This suggests that broad education is needed in the marketplace for Americans to better understand cookies, their uses, limitations and benefits before broad market acceptance.

Consumers Want Targeted Ads

Given the high percentage of consumers who have received an explanation of cookies and their uses and approve of collecting information on them, it appears that given the opportunity and proper explanation, consumers see the benefit of targeted advertising. In fact, certain data suggest profile-based targeting is not in use as much as consumers would accept. 

Indeed, in 1996, 60 percent of Americans agreed it's somewhat acceptable to compile profiles of individual purchasing patterns and use that information to target direct-mail offers at consumers who are most likely interested (Equifax-Harris Consumer Privacy Survey). However, 64 percent from the same poll believe that online service providers should not be able to track user browsing patterns over the Internet to learn interests and send targeted marketing offers. (Keep in mind, 1996 was early in the development of these technologies and their users). 

Not quite as many people believe cookies should be used for ad targeting as content personalization, perhaps because of the direct benefit content personalization has over a targeted commercial message-content isn't there to sell something, or so it would seem. Consistent with the 1996 Harris-Equifax survey where 60 percent of consumers agree with profiling for targeting direct mail, the same number today agree with the use of an identifier (such as a cookie) to provide customized advertising (AT&T Labs, April 1999), and 44 percent of consumers agree with the use of an identifier to provide customized advertising across many Web sites such as an ad network. In addition, according to Opinion Research Corporation survey for Privacy in American Business, 61 percent of users are interested in receiving banner advertisements tailored to their personal preferences.

Although 87 percent of Web sites use cookies to gather information (Electronic Privacy Information Center, December 1999), only 35 percent of Web sites use some form of profile-based targeting (Electronic Privacy Information Center, December, 1999), a practice that is accepted by approximately 60 percent of users (see previous paragraph). This suggests that consumers would be more accepting of profile-based targeted ads than what's currently being utilized by Web sites.

Consumers Can't Trust What They Don't Understand

The evidence above clearly suggests that given the opportunity, and perhaps proper explanation, consumers are accepting of targeting-the "holy grail" of advertising. When users understand the technology, they become more comfortable and are able to trust the technology provider. In addition, when targeting is positioned as something beneficial rather than sinister, the user clearly sees the benefits and appreciates them. 

However, like the early days of the credit card when people were apprehensive to hand the card over to a waiter, most consumers don't understand cookies and their capabilities. And because no one has taken the time to explain them (not that a consumer would give anyone that time, this is another issue), consumers fear for their privacy. This fear trickles up to the government where regulation is a form of forced or implied trust-a last resort for everyone.

In conclusion, expect regulation at a minimal level, just to provide consumers some level of comfort. However, the industry needs to educate the public through the press, the positive aspects of cookies and targeting, rather than the more common news that covers the sinister possibilities. Only through education and understanding will consumers accept the practice.

Keith Pieper currently is an independent eBusiness analyst with KeithPieper.com, 
providing custom and syndicated market, competitive and customer analysis studies for Internet companies entering new or undefined, bleeding-edge markets. 
He is also the author of the "Internet 
Data Report" and "Interstitial Advertising Report," both currently available for 
purchase at Digitrends.net.