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Editorial 25/2: Electronic Markets and privacy

Dear readers of Electronic Markets,

The aspect of privacy is a current and at the same time an established topic for electronic markets. In its first issue of 2015, Science magazine featured a special theme titled “The End of Privacy” (Enserink and Chin 2015), which was motivated by the need to find a balance between protecting private data on the one hand and making it available for desired uses on the other. While data on individuals and/or organizations is necessary for providing value-adding information services, such as monitoring, analyzing or tracking data for health, transactional or other behavioral purposes, the “right to be left alone” is still posited a valuable good in itself (e.g. Berendt et al. 2005, p. 101). However, keeping private data private is increasingly becoming a challenge: Recent research shows that even if data is anonymized, linking multiple anonymous data points enables algorithms to re-identify the “underlying” individual or organization (de Montjoye et al. 2015). The tradeoff between both contrary developments has also been referred to as “personalization-privacy paradox” (Sutanto et al. 2013), but in addition to the fact that users are concerned about breaches of their privacy, this problem is more often also a problem of trust (Strathoff and Lutz 2014). Platform and service operators are regarded as unreliable actors who are not transparent and use data for unauthorized or unintended purposes. This means that information hubs, such as electronic markets, play a key role in this race between protecting information and making it selectively available for desired uses (see Fig. 1):

Fig. 1
figure1

Levels of privacy in electronic markets

  • First, electronic intermediaries are providers of (cloud) services that link multiple actors in value chains, such as buyers and sellers, and should ensure a minimum level of security on the infrastructural, i.e. data access and transfer level. In the business-to-consumer domain, widespread encryption-based technologies used for accessing services are Https and SSL, while in the business domain dedicated networks (e.g. SITA in the airline industry or ENX in the automotive industry) have emerged to offer higher levels of security. The goal is to create data and, in the case of electronic markets, a transaction environment enabling secure access and storage of (transaction and identity) data as well as the governance of personal data (e.g. who is allowed to see, modify and/or delete data and under which regulations).

  • Second, electronic markets are not limited to providing a secure environment, but also need to address how the participating actors (i.e. sellers and buyers) use this infrastructure. Usually, transactions for goods and services on electronic markets comprise functionalities for information, contracting and settlement activities. Among the examples for these (primary) business transactions are information and comparison searches as well as ordering in a multi-vendor catalog or an auction platform. The intermediary facilitates transactions and privacy measures may ensure that data collected prior, during and after the transactions is kept private and not made available for other (marketing) purposes, such as cross-selling. For example, airline reservation systems are similar to search engine providers who generate knowledge from the searches and the user behavior on their platform. Since many transactions are complex and represent bundles of individual products, the classical passenger name records have been enhanced to become so-called “Total Travel Records”, which not only comprise data from flights, but also from hotels, restaurants or concert ticket agencies (Boehmer 2013). Obviously, this has the potential to make customers more transparent and in case of privacy breaches the reputation or integrity of a person or organization can be seriously damaged.

  • Third, data also emerges from the activities on the electronic market platform itself and may be used for secondary transactions. Service providers and intermediaries have accumulated detailed data on individuals from the bookings made via the platform and algorithms as mentioned above are helpful for deriving knowledge on individual user behavior and preferences as well as on collective developments, such as evolving trends or causalities and correlations. For example, selling anonymized data on aggregated transactions, customer (segments) and the like are established services by marketplace operators (e.g. Alexa by Amazon). Obviously, the transparency on how these data are re-used remains even more obscure for consumers, and mechanisms to control this universe of potential uses are still open fields of research. They could also offer interesting opportunities for (new) intermediaries and electronic markets for personal data as discussed in the present special issue are an important contribution to this debate.

The three levels illustrate that inappropriate handling of (personal) data in the electronic market environment may have severe consequences for the marketplace participants and in particular regarding the trust in the marketplace operator. An analysis of past articles published in Electronic Markets reveals that this relationship between trust and privacy has repeatedly been a topic in our journal since 2001. However, the 25 papers that were identified mainly focused on the first levels of privacy (see Table 1):

Table 1 Articles on security and privacy published in Electronic Markets
  • The issues discussed on level 1 include a proposal of a fair and privacy-preserved protocol for sealed-bid auctions (Liao and Hwang 2001), a privacy-aware decision engine (Gogoulos et al. 2014) or a digital rights management scheme for Web services in e-commerce (Kwok et al. 2003). Research also addressed the impact of perceived privacy empowerment (van Dycke et al. 2007) as well as privacy issues in the era of ubiquitous commerce (Galanxhi and Nah 2006; Loebbecke 2007) and the “Internet of things” (Xu and Gupta 2009), where additional privacy concerns arise due to the availability of location-based information from various mobile technologies (e.g. RFID tags, smartphones).

  • Research on level 2 mainly investigated contingencies determining the emergence of trust among the participating parties and, in particular, the trust towards the website or market provider. Online trust has been viewed as the result of privacy and security measures (Riquelme and Román 2014) and has been recognized as an important factor for the continued use of electronic platforms (Sun et al. 2014; Becker et al. 2008). Early insights on trust-building elements, such as privacy seals and reputation advertising, have been suggested by Mcknight et al. (2004), while Saeed and Leitch (2003) propose a framework for assessing the sourcing risk. Transparent communication on how data are secured and the availability of adequate legislation has also been emphasized in the area of mobile commerce (see O’Reilly et al. 2012).

  • Some indications on the relevance of level 3 were provided in the first special issue that was dedicated to “Security and privacy in business networking” (Wohlgemuth et al. 2014). The guest editors coined the vision of “making business processes resilient” and one contribution recognized that the “collection, processing, and selling of personal data is an integral part of today’s electronic markets” (Kieseberg et al. 2014, p. 113). It suggested an anonymization algorithm that might be used as an infrastructural element for these purposes.

The present issue of Electronic Markets provides more insights on personal data markets, which may be viewed as a development on level 3. We are indebted to the team of guest editors (Sarah Spiekermann from Vienna University of Economics and Business, Alessandro Acquisti from Carnegie Mellon University, Rainer Böhme from Westfälische Wilhelms Universität Münster, and Kai-Lung Hui from The Hong Kong University of Science and Technology), who managed to organize a comprehensive issue for a highly relevant topic. It not only includes three research articles, but also an invited paper from practice (Maguire et al. 2015) and a position paper by the guest editors themselves, which adds to the understanding of the problem of personal data markets and on how the field might develop (Spiekermann et al. 2015b). As usual, the guest editors will introduce all five special issue papers in their preface (Spiekermann et al. 2015a). We hope you enjoy reading these articles!

Last but not least, we are happy that Electronic Markets has improved its position in one of the most important rankings in the German-speaking area. While the earlier Jourqual 2.1 ranking listed Electronic Markets as “C”, it is now ranked “B” in Jourqual 3 (JOURQUAL3, 2015). Needless to say, the voting reflects the continued effort of all members of the Electronic Markets’ community – readers, authors, reviewers and our members of the editorial board. We wish to take the opportunity to express our gratitude for your effort and hope that you support us in making Electronic Markets an even more valuable source for scholars as well as practitioners in the future.

Best regards from Leipzig and St. Gallen,

Rainer Alt, Carsta Militzer-Horstmann, Hans-Dieter Zimmermann

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Alt, R., Militzer-Horstmann, C. & Zimmermann, HD. Editorial 25/2: Electronic Markets and privacy. Electron Markets 25, 87–90 (2015). https://doi.org/10.1007/s12525-015-0193-y

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