Privacy and E-Commerce

Jessica D. Litman, University of Michigan Law School


If you spent any part of the last two weeks reading those roundup articles they have in the newspapers about the year in e-commerce, you saw the same theme echoed again and again: "Where is the business model that makes money?" We do not seem to have found it. Subscriptions, when you are talking about selling content, have so far failed for works of general interest. Banner ads seemed for a while to be an obvious solution, but it turns out that consumers do not click on banner ads very often. Most people have figured out how to ignore them. What seems right now to look like it is going to be the most viable model is the delivery of "eyeballs" to merchants along with detailed demographic and other information. Targeted advertising follows this model. If you subscribe to the New York Times on the Web, you know it gives out free subscriptions in return for your answers to a slew of very intrusive questions. The Times uses that information to decide what banner ads go to whose eyeballs. The theory here is if you show me an ad for something I want to buy, I will click through; and if you compile enough information about me, you will know what I want to buy. This is an information barter system. Content suppliers make content available at no cost in return for information about the reader, which is then sold to people who want to reach the reader. The rapacious collection, sale, and rental of consumer information has completely transformed the bricks-and-mortar marketplace. Once upon a time, the stuff we think of as advertising was about delivering product to consumers. With the advent of targeted marketing, the paradigm has shifted. Advertising is about delivering eyeballs to merchants, and we are now the product.