E-commerce success may depend on online privacy

Service providers are appealing to the public's desire to access information from a PC. From paying their phone bills to buying a new winter wardrobe from Lands' End, consumers can fire up their computers, and with a mouse click, the transaction is complete. But as e-commerce grows, so does the lack of privacy. As more companies offer consumers the choice to shop online, more personal information will float in cyberspace.

"Over the last 18 months, there has been a change in how much focus has been on privacy," said a spokeswoman for the Online Privacy Alliance. "Up until a year ago, privacy was not a priority."

When many Internet companies were getting started, they were concerned about how to drive traffic to a particular site and how to fund other business issues, she said. Now, companies understand that providing privacy is a business issue and have discovered that it can set them apart in a competitive market that is exploding and converging.

With the rise in e-commerce and the increased need for privacy, a new breed of provider has etched out a place in the market. Two-year-old Zero-Knowledge Systems is an Internet privacy company that created the Freedom Partnership Program to enable ISPs, organizations and individuals to promote privacy on the Web.

"A lot of ISPs want to differentiate themselves. They can by joining the Freedom Network," said Hamnett Hill, executive vice president and chief operating officer of Zero-Knowledge Systems.

To date, 85 ISPs in nearly 20 countries use the company's network. The Freedom solution uses high-level encryption and multiple re-routing of Internet communications to privatize on-line activities, including the Web, e-mail and chat.

But for e-commerce to continue to grow, it is imperative that providers solve end-user concerns, Hill said.

"However you slice it, the end consumer is incredibly concerned about privacy," he said. "E-trade went through the roof, and if consumers feel their ISP cares about privacy, it will make a huge difference competitively."

Jumping into these competitive waters, Lucent Technologies recently announced that it would begin testing its privacy solution, which also is free. Proxymate.com allows users to surf the Web with the knowledge that all activity will remain private.

"As long as Web sites collect data about consumers, there will be a natural [tendency] for consumers to protect privacy," said Robert Lee, director of Lucent's New Ventures Group. "It will always be an issue into the future since the Internet is still in its primary stages, and a lot of issues are unsolved."

Proving that the issue has had wide-reaching effects, companies such as AT&T, IBM and Microsoft recently made public stances regarding privacy. Microsoft announced that it would no longer accept or purchase Internet-based advertising from Web sites that do not post clear policies regarding the collection and use of personal information gathered online. This policy took effect on Oct. 1.

According to a Jupiter Communications' report, 64% of online consumers are unlikely to trust a Web site even if it proclaims a privacy policy, which underscores the relevance of the privacy issue. Even though most sites display some kind of privacy policy when requesting personal information, many consumers remain uneducated about the logistics of online privacy protection.

Perhaps consumers lack knowledge about the issue because companies' Web sites often lack information surrounding their specific policies. "The main reason there is concern is because consumers do not know how their information is being used," said Evan Hendricks, editor of the Privacy Times newsletter. "Companies need consumer confidence so they will buy over the Internet and make e-commerce work."