Intimate Shopping
“Information,” the apostles of cyberspace have been singing for more
than a decade, “wants to be free.” Well, maybe your information does. But
in late November, the social networking Web site Facebook
discovered that many of its 58 million members don’t feel that way. On social
networks, people can exchange photos, letters and information with people they
know, and “friend” people they don’t. Facebook has grown so big, so rich (its
market value is estimated at $15 billion) and so addictive because it offers its
users new ways to exchange information and intimacies with people they care
about. In early November, Facebook’s 23-year-old C.E.O., Mark
Zuckerberg, rolled out an advertising program called Beacon. It would track
users onto the sites of Facebook’s commercial partners — Coca-Cola,
the N.B.A., The New York Times and Verizon,
among others — and keep their friends posted about what they were doing and
buying there.
Did it ever. A Massachusetts man bought a diamond ring for Christmas for his
wife from overstock.com and saw his
discounted purchase announced to 720 people in his online network. What if it
hadn’t been for his wife? What if he had been buying acne cream? Pornography? A
toupee? You could go on. Researchers at Computer Associates, an
information-technology firm, discovered that Beacon was more invasive than
announced. MoveOn.org
started a petition movement against Beacon that rallied 75,000 Facebook
subscribers.
Facebook designed Beacon so that members would be able to “opt out” by
clicking in a pop-up window. But these windows were hard to see and disappeared
very fast. If you weren’t quick on the draw, your purchases were broadcast to
the world, or at least to your network. Since people, too, sometimes want to be
free, privacy advocates urged that Beacon be made an “opt in” program, which
members would have to explicitly consent to join. In early December, Facebook
agreed to this approach.
The Beacon fiasco gives a good outline of what future conflicts over the
Internet will look like. Whether a system is opt-in or opt-out has an enormous
influence on how people use it. He who controls the “default option” — the way a
program runs if you don’t modify it — writes the rules. Online, it can be
tempting to dodge the need to get assent for things that used to require it.
This temptation is particularly strong in matters of privacy. For instance, the
“default option” of the pre-Internet age was that it was wrong to read others’
mail. But Google
now skims the letters of its Gmail subscribers, in hopes of better targeting
them with ads, and the N.S.A. looks for terrorists not only in the traditional
manner — getting warrants for individual wiretaps — but also by mining large
telecommunications databases.
So it is with Facebook’s Beacon. We used to live in a world where if someone
secretly followed you from store to store, recording your purchases, it would be
considered impolite and even weird. Today, such an option can be redefined as
“default” behavior. The question is: Why would it be? The price in reputation
for overturning this part of the social contract is bound to be prohibitively
high.
For the owners of social-networking sites, it may be a price worth paying.
Thanks to data-collection technology, your shopping choices and preferences have
value. Who owns those choices? Common sense says that you do. If a company wants
to use you to advertise its products, it can pay you, just as Nike
pays Tiger
Woods. But the idea that your preferences (not to mention your conversations
about them) are your property rests on an implicit social contract. And the
thing about implicit contracts is that people who can figure out ways to break
them can often make a lot of money.
The concept of “implicit contracts” was developed in a landmark 1988 paper by
the economists Andrei Shleifer and Lawrence
Summers. Their subject — hostile corporate takeovers — seems far from
cyberprivacy, but it is not. Shleifer and Summers showed that increases in share
price following takeovers were not due to gains in efficiency, as the defenders
of those buyouts claimed. There often were such gains, but they were not the
source of the profits. The profits came from reneging on implicit contracts —
like the tradition of overpaying older workers who had been overworked when
young on the understanding that things would even out later. These contracts,
because implicit, were hard to defend in court. But the assets they protected
were real. To profit from them, buyout artists had only to put someone in place
who could, with a straight face and a clean conscience, say, “I didn’t promise
nothin’!”
As commerce moves from Main Street to the Web, lots of businessmen are in
that position. All bets are off, and entrepreneurs are seeking new ways to make
money by trial and error. Sometimes they do so by adding value to the economy.
Sometimes they do so by abrogating implicit contracts. Like managers newly
seated after a hostile takeover a quarter-century ago, today’s online innovators
are not always skilled at telling the difference: “Your friendships are your own
business? Golly, I wasn’t here when they negotiated that.”
Beacon was a clumsy attempt to reset the default on the common-sense
understanding of discretion and to profit off the resetting. As in the 1980s,
technological sophistication, entrepreneurial genius and gains to efficiency are
a part of this story — but a larger part was the attempt to monetize and sell a
vulnerable implicit contract. Facebook was thwarted, as the corporate raiders of
years past were not, because it aimed not at pension plans and seniority-based
pay scales but at something considerably more valuable — the unwritten rules of
privacy that make civilized human interaction possible.
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