Orion Brown began Black travel box to serve black women travelers who find hotel lotions and shampoos inadequate. Randel Bennett co-founded an insurance startup I stay secure for underserved Spanish-speaking drivers. Bill Shufelt and John Walker founded Athletic Brewing Company so athletes and other people who don’t drink in social situations you possibly can drink tasty non-alcoholic beer.
What do these three successful corporations have in common? In each case, the entrepreneurs built their businesses on personalized promoting platforms like Facebook and Instagram. They didn’t have the budgets for TV ad campaigns to compete with larger corporations. And they were all serving markets that had previously been ignored.
The privacy bill that Congress is considering could inadvertently make it harder to implement similar initiatives in the long run. We are professors Marketing who’re experts within the scientific study of the impact of public policy on marketing. We are concerned that the bipartisan bill – America’s Right to Privacy Act – could undermine small businesses that rely on targeted digital promoting.
While the Americans favor an increasing number of The government is taking a more interventionist approach to protecting data privacy, and a growing body of rigorous research shows that privacy laws can have unintended consequences.
Privacy Rights and Wrongs
The American Right to Privacy Act – introduced by lawmakers in each the House and Senate in April 2024 – because the Senate summary shows, this is able to create “national consumer data privacy laws and the establishment of data security standards.”
The bill would create a national standard for data collection and use. A national standard would have the advantage of unifying the body of state laws. In an editorial supporting the bill, The Washington Post described the bill as “as tough, if not tougher, than any the states have ever brought together.” Tougher is best, right?
Not necessarily.
The discussed draft state laws are mostly modelled on European projects. General Data Protection Regulation, or GDPRThe European Union advertises GDPR as “the strongest privacy and security law in the world.”
But a growing body of scientific literature shows that privacy regulations like GDPR can have unintended consequences. In May, the nonprofit Marketing Science Institute published Our report summarizing this work. In short, data privacy will not be free – it requires trade-offs.
The Price of Privacy
For starters, there may be a trade-off between privacy and the utility of data sharing for businesses and consumers. The 2006 book “Long tail” described how digital marketing has transformed our economy from a market focused on selling blockbuster products to a market serving many smaller niches of consumers with diverse needs and tastes. Digital marketing enables small businesses and consumers with unique needs to search out their area of interest.
There can be a trade-off between privacy and honesty. Just as consumers differ of their needs for products, additionally they differ in whether, when, and why they’re willing to share data. Tests will be seen that those that are most willing to attenuate data sharing are wealthier, more educated, and older than those that are less willing. We consider that the goal of privacy regulation needs to be to present consumers control over their data, to not decelerate the flow of data for everybody.
More detailed personalization can exclude marginalized consumer segments. Some lower-income consumers and certain minority groups live in a digital world data desertsThe problem will not be that corporations know an excessive amount of about them. Instead, they’re so invisible that they’re unknowingly excluded from the digital economy.
Privacy will be, in some ways, an issue of privilege. We are usually not aware of any rigorous research showing that tightening digital marketing privacy rules brings tangible economic advantages to anyone, let alone lower-income consumers.
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There can be a trade-off between privacy and freedom from discrimination, especially against marginalized groups. Algorithms have been known to unintentionally discriminate. For example, one study found that women were less likely than men to receive ads for STEM job openings. That seems unfair.
Regulators, including the creators of the American Privacy Rights Act, have really helpful that corporations limit the data they collect to only what is affordable and needed, minimizing details about race, gender or other protected class attributes. But without this information, how will regulators and corporations check data-driven marketing algorithms for unintentional discrimination?
Finally, there may be a trade-off between privacy and marketer innovation. Many small brands exist because digital marketing allows them to create sustainable small-scale businesses without huge media budgets. Digital promoting costs a fraction of what it takes for traditional TV campaigns, saving small businesses within the U.S. $163 billion per 12 months. Small brands more advantages with more precise targeting than large brands with a wider reach.
A growing body of research shows that privacy regulations can decelerate innovation and reduce the competitiveness of markets. This is very damaging to the identical small businesses and entrepreneurs who profit most from the power to exactly goal their messages to different consumers.
Recently, privacy advocates have begun to label those that advocate the advantages of personalized marketing as “corporatists.” Ironically, this small corporations who profit probably the most from personalized marketing, as our report for the Marketing Science Institute shows.
Giants like Unilever and Nike are gaining competitive advantage from privacy regulations and changes to platform privacy policies which can be dramatically raising the associated fee of acquiring latest customers for small businesses, while giants like Amazon and Walmart are gaining latest appeal as promoting platforms. Similarly, studies show that GDPR has strengthened the dominant market position of Google and Facebook in Europe and disproportionately increased the prices of privacy compliance for smaller corporations.
We actually consider that the bill now before Congress has value in protecting consumers’ privacy rights. Maybe a throw included exemptions for small businesses, for instance, but without addressing how they rely on others’ data to accumulate customers. In June, divisions between Republicans and Democrats led to canceling tag session.
We consider Congress can be smart to seize the present impasse and punctiliously consider how the proposed law would impact smaller retailers and disadvantaged consumer groups.