ANALYSIS: IBM Issues a Challenge -- 'Follow our Lead on Online Privacy'

By Sam Albert

IBM, the second largest advertiser on the Web (behind Microsoft) announced that starting June 1, it will pull its online advertisements from all U.S. and Canadian Web sites that do not post strict privacy policies. These sites are being approached by IBM to publicly disclose how they collect and use personal consumer data. IBM is the first – and so far only – industry leader to make this stand.

With $60 million set aside for Internet advertising in 1999, it goes without saying that IBM has the advertising muscle to instigate change. But IBM says the purpose isn't to pull back from the company's commitment to spend those millions (up from $45 million in 1998). Instead, it's an effort to enforce privacy practices that it views as fundamental to e-business security.

In 1998 IBM advertised on 784 Web sites worldwide, and three-fourths of its online spending was concentrated in the U.S. and Canada. While that's a logical place to start, IBM plans to broaden its focus to Latin American and Asian countries soon after.

There appears to be several advantages to IBM's approach – first, a privacy policy can go a long way toward easing consumer concerns about security, still considered the largest impediment to e-business. Don't misunderstand me. I'm not accusing any one business or industry of trying to sidestep its privacy obligations. In fact, many, if not most, have good intentions. But good intentions can only go so far. Consumers want visible reminders, and they deserve them.

Second, while there's no quick way to settle the current debate over "private or public" Internet privacy regulation, IBM's new policy shows that Big Blue clearly believes the industry can police itself. If other large advertisers will step up to the plate, (and Microsoft, you're currently the most prolific Web advertiser out there), such action might preclude government regulation.

The FTC (Federal Trade Commission) and Congress are watching closely to gauge the industry's progress. And Robert Pitofsky, chairman of the FTC, agreed that IBM's policy will only take flight "if IBM is the first of many who do the same thing." I'm not surprised by Pitofsky's skepticism, as the FFTC readies a report – and its recommendations – to Congress later this spring.

Admittedly, to some Web site publishers, the policy might represent little more than a possible loss of IBM's advertising dollars. But to IBM, it's a chance to take a stand on an important issue.

Statistics point to an uphill battle, because a recent 1999 survey showed that just 30 percent of current Web sites that IBM advertises on post privacy policies. But those numbers aren't all bleak; by comparison, just 14 percent did so in 1998. Still, there's a long way to go. And in the process, some ads may be pulled, and some feelings may get hurt. It appears IBM is ready to take on that risk.

Big Blue is raising the bar for others to follow, but that may be as far as it goes. If Microsoft, Intel and others don't voluntarily adopt industry "best privacy practices," (individual policies can vary from site to site), it's a red carpet invitation for the government to step in – and many consumer advocates are petitioning the FTC to do just that.

So far, Microsoft has reserved comment. But IBM seems to be sticking by its guns on an issue that's increasingly critical as the Web explosion moves into the new millennium. The power of the Internet will only increase; so let's keep transactions secure, customer relationships private, and personal information just that -- personal. It's necessary if e-business is to become the powerhouse it can be. If we, as an industry, want to avoid government intervention, get behind this initiative and any others that will allow the IT industry to continue self regulation. IBM, I for one, think you're headed in the right direction.

Sam Albert is president of Sam Albert Associates (Scarsdale, N.Y.), a consulting firm that specializes in developing strategic corporate relationships.

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