Amazon.com last
week
made clear what many customers already knew to be true: The Internet
retailing giant considers the personal information it gathers from
members
to be its own property, and thus will do whatever it wants with the
data,
including selling it.
While that wasn’t Amazon.com’s intended message, it is the bottom line.
The
company’s announcement of a revised privacy policy hardly was made in
the
spirit of candor. Rather, Amazon.com is responding to growing resentment
among consumers and consumer advocates toward what they consider to be a
blatant violation of their privacy by revenue-desperate Web companies.
But the real target of Amazon.com’s revised policy isn’t the parent shopping for the
latest Harry Potter book or a college student ordering the new Korn CD
(assuming, of course, they didn’t just download it from Napster for
free).
It’s federal and state officials who are casting an increasingly
litigious
eye on the collection and sale of personal information by Internet
companies.
The issue erupted dramatically in July when the Federal Trade Commission
sued Toysmart.com to prevent the failed online toy merchant from
selling
its customer list to help repay creditors after promising customers all
private information would be kept confidential. Toysmart.com filed for
bankruptcy after majority owner Walt Disney Co., withdrew financial
support
in May.
An adverse precedent set by a court ruling or intervention by the FTC
could
seriously diminish, or even render worthless, the value of customer data
collected online. This presents a real danger to investors in Amazon.com
or
any company that counts customer information among its tangible assets.
Indeed, it may be that one of the reasons so many e-tail and content
stocks
have fared even worse than those in other sectors this summer was a
growing
(and valid) realization among investors that a large chunk of those
companies’ assets in the form of customer databases might evaporate.
Buy.com , for example,
is
down 35% since July 11, when the FTC announced its lawsuit against
Toysmart.com. Another major e-tailer, Barnes & Noble.com , is down 36% in that time. And both these stocks already
had
dropped drastically since March.
I doubt Amazon.com’s bid to allay privacy fears will work if anyone
reads
the fine print. In its lengthy policy statement, the company insists
that
“information about our customers is an important part of our business,
and
we are not in the business of selling it to others.”
However, several paragraphs later we are told that “in the unlikely
event
that Amazon.com Inc., or substantially all of its assets are acquired,
customer information will of course be one of the transferred assets.”
Personally, I find this less than reassuring, especially since I don’t
consider a buyout or even the eventual disappearance of Amazon.com to be
an
“unlikely event.” The e-tailer is a huge money-loser and has yet to
prove
that its business model works. Why wouldn’t I expect it to leverage my
personal information in an effort to turn around its finances?
Especially when you consider what Amazon.com’s customer list might be
worth.
Toysmart was offered more than $50,000 by one prospective buyer for its
list
of 250,000 customers. What’s the value of Amazon.com’s list of 23
million
registered users? It may well be a good chunk of AMZN’s $17 billion
market
capitalization. Given the threat posed by potential legal rulings
restricting how Amazon.com and others dispose of their customer list
s,
we
may find out sooner than you think.
