Is the New E-Biz Privacy Technology Already Moot?

The latest release of Microsoft's (Nasdaq: MSFT) Internet Explorer 6.0 should have been the perfect opportunity for e-tailers to show consumers they are serious about online privacy. Instead, it may turn out to be just the opposite.

Embedded in IE 6.0 is the first incarnation of a new privacy platform standard established by the World Wide Web Consortium (W3C), called the Platform for Privacy Preferences (P3P).

P3P allows consumers to put their privacy preferences in their Internet browsers. The software using the browser to automatically read the privacy policies at the Web sites visited, and alerts consumers if they enter a site that does not meet the personal privacy requirements they entered.

But the IE version of P3P only deals with the part of that privacy standard that manages "cookies" -- those bits of data that Web sites put on consumers' computers to track and personalize Internet experiences. The IE version of P3P doesn't address whether a company shares its data with others, how secure personal information is on a particular site, or how site security is managed.

But that should be enough to cause some significant chaos for both e-tailers and online shoppers.

Getting Away With It

For the most part, e-tailers have been able to get away with a somewhat lackadaisical approach to online privacy issues, taking the "what you don't know won't hurt you" stance in the name of personalized customer service.

Unless you have the wherewithal to specifically opt out of data tracking when you first visit a site, most e-tailers still have the green light to continue gathering information about you as you surf their sites and make your purchases.

Help or Helpless

However, the first problem with P3P is that it doesn't really make anyone's information more private or secure. It's primarily an educational medium, meant to make e-tailer privacy standards more transparent.

The onus with P3P lies squarely on the shoulder of consumers, with whom rests the decision of whether or not to continue on with a "violating" site.

An abrupt warning message may certainly make consumers think twice about visiting a site, let alone make a purchase there, but what happens when consumers receive this message at practically every site they visit?

Annoyance Factor

This is a likely scenario given the inherent flaws in the scaled-down IE version of P3P.

Across the board, P3P experts are saying that the vast majority of e-tailers aren't even close to having their sites P3P ready. Data spills, such as when a company uses a form to collect personal information and that information is inadvertently passed on to a third-party observer, are likely, they say.

In addition, many larger sites with third-party content provided by affiliates may discover that their own cookies won't be accepted on their own site. And larger sites could also discover to their surprise that as customers move through multiple site pages, first-party cookies that are accepted in one area turn into third-party cookies that violate P3P rules in another.

Perhaps worst of all for e-tailers, if a site isn't designed for P3P properly, consumers could get a message stating they can't trust the site, regardless of whether or not the site matches their preferences.

Tuning Out

Shopping online is still a fickle activity, and anything that distracts from the shopping experience will affect the bottom line -- but for how long?

Most of us will figure a way to set the P3P levels at the lowest possible setting to get rid of these bothersome warnings, thereby defeating what P3P is intended to do in the first place. No wonder most e-tailers don't seem to be worried about coming up to speed on P3P compliance.

So in the end, it's likely that both e-tailers -- especially those that rely heavily on personalization cookies -- and privacy advocates will suffer from the first half-hearted go of the new privacy platform, at least in the short-term.

Eventually, e-tailers will be forced to clean up the mess that results from an estimated 35 million IE users finding sites full of warnings. But until then, Web shoppers will have to deal with the watered-down version of a promising technology that will generate an early reputation as unstable and frustrating.

But at least Microsoft, and major e-tailers, will be able to say they gave enhanced privacy standards the old college try.

What do you think? Let's talk about it.