Study: Shoppers will pay for privacy

Carnegie Mellon research counters prior studies showing online shoppers are willing to sacrifice privacy for lower prices.
Written by Candace Lombardi, Contributor
Would you pay a little more for that book you bought online if it meant lowering your chances of being hassled by marketers, spammers and hackers?

Carnegie Mellon University researchers believe consumers will pay more per item online to protect their private information, according to a paper (PDF) being presented Thursday at the 2007 Workshop on the Economics of Information Security.

The Carnegie Mellon Usable Privacy and Security Lab (CUPS) monitored the habits of people ranging in age from 18 to 71 who were given money and instructed to buy certain items online while using the search engine PrivacyFinder.org.

PrivacyFinder.org, a search engine developed by CUPS, evaluates a Web site's privacy policies according to the Platform for Privacy Preferences developed by the World Wide Web Consortium. It displays a site's rank alongside search results.

The researchers found that people were willing to pay about 60 cents more for each $15 item purchased to protect their privacy. One of the items participants were instructed to buy was a sex toy, something they might be inclined to keep private. And subjects were also allowed to keep any money they saved.

"There have been so many other studies saying that people do not care about privacy," said CUPS director Lorrie Cranor. They've said that people are willing to give up privacy for lower prices, she added.

"We confirmed our hypothesis that people do, in fact, care about privacy and will pay for it," she said.

Cranor and her researchers weren't able to control the price differences between products offering more or less security, because they hadn't informed retailers what they were doing. In the next round, vendors are going to partner with the researchers to offer specific price differences that will reveal more information about what consumers are willing to pay.

Cranor's report could be positive news for a company like VeriSign, which in December launched a tool with Microsoft that changes the color of the browser address bar when it's displaying a Web site that has an "extended validation certificate," or EV SSL.

"When you're on a site with an EV certificate the URL tool turns green and green means go," said VeriSign Executive Vice President Mark McLaughlin, while explaining the tool at the JPMorgan Technology Conference in May.

VeriSign has been testing the tool with Overstock.com, an online discount store. As of now, the tool only works from an Internet Explorer browser when you click on the site's seal at the bottom of the page, not from the site's homepage.

"Overstock.com told us that with the EV they are seeing 8.5 percent less abandonment rates and that they attribute that to our tool," said McLaughlin.

"VeriSign hopes to educate consumers so that they associate that visual with the safety and authenticity of a site. People will start to associate that green URL with a green site as a safe site," he said.

Cranor plans to do an expanded field study next that real-life consumers using PrivacyFinder.org could opt into.

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