At a time when investors and venture capitalists are demanding revenue growth, fee-based services, and a return on their investment from Internet startups, these young companies are eager to leverage their most valuable assets: consumer data.
"Data is worth a lot of money," says Forrester public policy analyst Jay Stanley. In an online environment, "the incentive for startups to violate privacy is strong."
Alleged consumer privacy breaches by Internet advertising company DoubleClick and online retailers such as Amazon.com and Toysrus.com have raised questions about personalized services vs. consumer privacy violations. Once the new Congress convenes, online consumer privacy legislation will be on the agenda because it's a bipartisan issue that affects everyone, Stanley says.
Forrester estimates that consumer privacy fears will cost online retailers $12.4 billion in sales this year. And as privacy legislation becomes more complex, businesses will have to devote more resources to keep track of the laws and to ensure that all new ventures are in compliance.
Because privacy is hard to define, it's "impossible to write legislation for a problem that everyone views differently," says Tim Litle, founder of fulfillment service provider OrderTrust and board member of the Direct Marketers Association's Privacy Task Force. "Legislation doesn't work as well as self-regulation," Litle adds, because "policies evolve within the institution."