What Does It Really Matter If Companies Are Tracking Us Online?

A scholar argues that the core issue is protecting consumers from corporations that are developing ever more sophisticated techniques for getting people to part with their money.
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Say you, like me, went to bed a little early last night. And when you woke up this morning, you decided to catch the episode of the Daily Show that you missed. So you pointed your browser over to thedailyshow.com, and there, as you expected, is John Oliver. But there's something else there too, at least if you're me: flashing deals for hotels in Annapolis, which just so happens to be where I've been planning a weekend away.

We all are familiar at this point with the targeted ads that follow us around the web, linked to our browsing history. In this case, Google (who served me this ad) only got it half right: I had already booked a place.

And yet, I am planning a trip to Annapolis, and Google "knows" this, and is using this information to try to sell me stuff, a practice commonly criticized as "creepy." But as philosopher Evan Selinger asserted in Slate last year, the word "creepy" isn't particularly illuminating. What, really, is wrong with ad tracking? Why does it bother us? What is the problem?

A new paper by professor Ryan Calo at the University of Washington goes the furthest I have seen in elucidating the potential harms of digital-ad targeting. And his argument basically boils down to this: This isn't about the sanctity of the individual or even, strictly speaking, about privacy. This is about protecting consumers from profit-seeking corporations, who are gaining an insurmountable edge in their efforts to get people to part with their money.

But those are my words. Here are Calo's:

The digitization of commerce dramatically alters the capacity of firms to influence consumers at a personal level. A specific set of emerging technologies and techniques will empower corporations to discover and exploit the limits of each, individual consumer's ability to pursue his or her own self-interest. Firms will increasingly be able to trigger irrationality or vulnerability in consumers -- leading to actual and perceived harms that challenge the limits of consumer protection law, but which regulators can scarcely ignore.

Calo is taking the long view here. Digital marketing techniques haven't quite gotten sophisticated enough to take advantage of a consumer's idiosyncratic irrationalities. Right now, he writes, digital advertising's main strategy is relevance: putting the relevant ad in front of the right person. But Calo foresees a much more personalized approach down the road -- not just the right good, but a customized pitch, delivered late at night, when the company knows you, particularly, have a tendency to make impulse purchases.

This, of course, is not all bad. Calo describes many potential upsides to a marketplace in which companies have much, much more information about their customers. "Firms," he writes, "have incentives to look for ways to exploit consumers, but they also have powerful incentives to look for ways to help and delight them." So perhaps website will appear in color palettes that are highly appealing to you, or a hotel you book at will know about your allergies and prepares your room with a hypoallergenic pillow, or, most obviously, Google will serve you an ad for just the right hotel, at just the right price, before you've already booked elsewhere. And consumers too are getting more information about the products they are considering buying: There's Amazon reviews, apps that scan bar codes for price comparisons, and sites like TripAdvisor and Yelp that will help you avoid rip-offs of all kinds.

But that said, Calo still sees an imbalance in how this will play out, and that's because consumers are not perfectly rational, as the field of behavioral economics has demonstrated over and over. This leaves them vulnerable to persuasion to make decisions that are counter to their own self-interest. Oftentimes, this has negative but ultimately small consequences: "Maybe a consumer pays a little extra for a product, for instance, or purchases an item on impulse," Calo writes.

But the possibilities for exploiting those vulnerabilities are amplified dramatically when bolstered by the kinds of data Google and other firms have access to. Marketing has always been about getting consumers to spend money, but Calo argues that data tracking enables a level of sophistication that is different in kind, not just degree. "Digital market manipulation combines, for the first time, a certain kind of personalization with the intense systemization made possible by mediated consumption," he explains.

This is not a problem when the interests of firms and consumers align, as in the above examples, but, as Calo writes, "it would be highly surprising were every use to which a company placed intimate knowledge of its consumer in fact a win-win." It's where interests diverge, and actual harms are incurred, that the trouble lies.

So where does that trouble lie? What are those actual harms? Calo outlines three distinct types of damages. The first are economic: market failures, not unlike others that the government has decided merit corrective regulatory measures in the past, such as the regulation of cigarette ads. But in the case of digital marketing, Calo says, the inefficiencies aren't going to be such clear cases. Rather, the failures will come in the form of consumers being systematically charged more than they would have been had less information about that particular consumer.

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Rebecca J. Rosen is a senior editor at The Atlantic, where she oversees the Business Channel. She was previously an associate editor at The Wilson Quarterly.

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