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Sitting target: Are your internet-connected devices spying on you?

Feature | 17 July 2018

Kayleen Manwaring

Senior Lecturer

Intimate data makes us ripe for manipulation as consumer protections lag behind

In 2016, more than six billion devices were connected to the internet.

While that number may appear large, it will be dwarfed by the more than 20 billion devices that will be connected by 2020, according to technology research firm Gartner.

These 'Internet of Things' devices have the potential to improve our lives in many ways – smart fridges could automatically order food when we run low, other devices could monitor the health of the elderly and send updates to their doctor, and others could let you know if you have rats in your attic.

But in using these devices, consumers are potentially handing over large amounts of data to corporations and opening the way to be targeted by manipulative advertising, says Kayleen Manwaring, a lecturer in the school of taxation and business law at UNSW Business School.

The amount of available data will be huge. Gartner estimates that of all those connected devices in two years' time, about 12 billion will be consumer devices, which people will have in their homes, their cars and on their person.

In a recent presentation to a European conference on law and technology, Manwaring discussed the possibility of a disconnection between existing Australian consumer protection law and new marketing activities enabled by internet-connected devices and associated technologies, or 'eObjects'.

"Much of Australia's marketing regulation depends on the effect on the 'reasonable' consumer," she says. "However, the point of some of these activities is to subvert 'reasonable' decision-making by consumers."

'It’s much more effective than mass advertising and equally as effective as personal selling'
JAKE AN

A step change

The greater volume, intimacy and personalisation of data collected by eObjects, combined with the capability to use eObjects as marketing channels, will offer significant advantages to marketers in accuracy, scope, scale and effectiveness.

However, Manwaring believes these gains for marketers could give rise to significant harms for consumers, and consequential legal problems.

"The increase in electronic marketing and transactions enabled by eObjects may grant marketers a greater capacity not only to discover consumer preferences, but to use data and behavioural research to exploit the biases and other vulnerabilities of consumers," she says.

Manwaring refers to this as digital consumer manipulation.

Advertisers have arguably always done this, but Manwaring says the difference now is the magnitude of data able to be collected, and the diversity of personalised marketing channels provided by eObjects, which she says is a step change from previous practices.

While it is known that companies use personalised advertising and employ behavioural psychologists to help them target consumers, "there's not a lot of information out there about exactly what they're doing on a day-to-day basis, exactly what inferences they're taking from data, who and what they're trying to target, what algorithms they are using, and what specific actions they're taking", she says.

Most of the advertising is carried out by private companies, which are under few obligations to reveal what they are doing.

In fact, it was not until the revelations that British political consulting firm Cambridge Analytica was using data harvested from people's Facebook profiles to try to manipulate voters during the 2016 US presidential campaign that Manwaring felt confident that the public would accept the possibility that advertisers were doing similar things.

"I must admit, until Cambridge Analytica broke, I wasn't sure if people would be generally aware of the dangers, as the activities are generally so well-hidden. But if they're doing it to affect the outcome of elections, it's no great leap to accept they're doing it to try and sell us stuff, and probably far more intensively," she says.

Individual consumers

There is little doubt that targeted advertising works, says Jake An, a post-doctoral researcher in the school of marketing at UNSW Business School.

A meta-analysis of 114 published papers looking at targeted advertising found it had a large effect on consumer behaviour.

"It's much more effective than mass advertising and equally as effective as personal selling," An says.

"From the company's perspective, targeted advertising reduces wasted advertising and there's research that shows that targeted advertising allows a match between consumers' preferences and the advertised product's attributes."

The increased amount of data available on customers is allowing advertisers to further refine their marketing efforts and target individual consumers, says An.

But far from feeling as if they are being manipulated, consumers respond well to targeted advertising and it doesn't lead to negative or defensive behaviours, according to research cited by An.

Much of the reaction is about how the targeted advertising is promoted to consumers. If consumers feel like they are getting something in return for receiving targeted advertising, such as free articles or entertainment content, they are less likely to react negatively.

It raises the question of whether this could be considered to be manipulating consumers. An agrees that targeted advertising is about manipulation, but he says it could also be considered to be about influencing.

"There's a negative connotation that, if you manipulate someone, it's to the disadvantage of the target, whereas if you're influencing the person, it has a more neutral tone to it," he says.

However, a Consumer Policy Research Centre (CPRC) survey of 1004 Australian consumers released in May 2018 indicated that while some consumers (27%) found the use of their data for delivery of customised content to be beneficial, the majority (52%) believed the monitoring of online customer behaviour for use in targeted advertising to be "unacceptable".

Manwaring says more disclosure of companies' advertising practices is needed so that consumers and regulators know the extent of any activities that could amount to manipulation. Some types of behaviour may be acceptable, while others may not.

'At the moment companies can do almost anything they like with the data they collect'
KAYLEEN MANWARING

Decision-making vulnerabilities

Presently, consumers are protected to some extent by privacy laws. However, they sign away many of these protections when they agree to a company's privacy policy in order to use their services or buy their products.

"We know that people don't read privacy policies. They often don't understand them particularly well because many are drafted very badly," she says. "I don't understand half the privacy policies that are out there, and I'm trained to read them."

This is supported by consumer responses in the CPRC report.

There is also the question of who would be disadvantaged by this. The wealthy may be able to afford premium services that would give them more control over which of their data was released and how it was used, leaving the poor, the elderly and the disabled vulnerable.

Manwaring says that where digital consumer manipulation is successful, it has the potential to conflict with some of the goals of Australian consumer protection law, particularly those relating to unfair practices, protecting vulnerable or disadvantaged consumers, and providing accessible and timely redress. It also has the potential to fetter a consumer's freedom of choice.

Regulators and society need to ask what level of protection we should have and what we see as acceptable and unacceptable practices, she says. What advertisers are presently able to do with data and the way they target and potentially manipulate consumers may not fall under the protections offered by existing consumer law.

Yet there are precedents for regulating sales and advertising techniques that target decision-making vulnerabilities. For instance, the Competition & Consumer Act regulates door-to-door sales, mandating when sales people can visit and giving consumers a 10-day 'cooling off period' in which they can change their mind and cancel an agreement.

"We've already accepted that consumers' capacity for rational decision-making is bounded. So, the question for us is, 'Where do we see the boundaries lie in relation to emerging technologies?'" Manwaring says.

"At the moment companies can do almost anything they like with the data they collect. My point is we need to have a public conversation about whether everything that they're doing with it is actually acceptable to society."

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<h1>Sitting target: Are your internet-connected devices spying on you?</h1>

<figure><img src="https://assets-us-01.kc-usercontent.com:443/4df0558d-5779-0012-00f2-b3fa06d6c950/aaf0d039-498f-4323-b0a5-dc325b4a560b/iStock-1142153901.jpg?w=1320" alt="internet device" /><figcaption>internet device</figcaption></figure>
 In 2016, more than six billion devices were connected to the internet.
While that number may appear large, it will be dwarfed by the more than 20 billion devices that will be connected by 2020, according to technology research firm Gartner.
These 'Internet of Things' devices have the potential to improve our lives in many ways – smart fridges could automatically order food when we run low, other devices could monitor the health of the elderly and send updates to their doctor, and others could let you know if you have rats in your attic.
But in using these devices, consumers are potentially handing over large amounts of data to corporations and opening the way to be targeted by manipulative advertising, says Kayleen Manwaring, a lecturer in the school of taxation and business law at UNSW Business School.
The amount of available data will be huge. Gartner estimates that of all those connected devices in two years' time, about 12 billion will be consumer devices, which people will have in their homes, their cars and on their person.
In a recent presentation to a European conference on law and technology, Manwaring discussed the possibility of a disconnection between existing Australian consumer protection law and new marketing activities enabled by internet-connected devices and associated technologies, or 'eObjects'.
"Much of Australia's marketing regulation depends on the effect on the 'reasonable' consumer," she says. "However, the point of some of these activities is to subvert 'reasonable' decision-making by consumers."
<blockquote>'It’s much more effective than mass advertising and equally as effective as personal selling'JAKE AN</blockquote>
<h4>A step change</h4>
The greater volume, intimacy and personalisation of data collected by eObjects, combined with the capability to use eObjects as marketing channels, will offer significant advantages to marketers in accuracy, scope, scale and effectiveness. 
However, Manwaring believes these gains for marketers could give rise to significant harms for consumers, and consequential legal problems.
"The increase in electronic marketing and transactions enabled by eObjects may grant marketers a greater capacity not only to discover consumer preferences, but to use data and behavioural research to exploit the biases and other vulnerabilities of consumers," she says.
Manwaring refers to this as digital consumer manipulation.
Advertisers have arguably always done this, but Manwaring says the difference now is the magnitude of data able to be collected, and the diversity of personalised marketing channels provided by eObjects, which she says is a step change from previous practices.
While it is known that companies use personalised advertising and employ behavioural psychologists to help them target consumers, "there's not a lot of information out there about exactly what they're doing on a day-to-day basis, exactly what inferences they're taking from data, who and what they're trying to target, what algorithms they are using, and what specific actions they're taking", she says.
Most of the advertising is carried out by private companies, which are under few obligations to reveal what they are doing.
In fact, it was not until the revelations that British political consulting firm Cambridge Analytica was using data harvested from people's Facebook profiles to try to manipulate voters during the 2016 US presidential campaign that Manwaring felt confident that the public would accept the possibility that advertisers were doing similar things.
"I must admit, until Cambridge Analytica broke, I wasn't sure if people would be generally aware of the dangers, as the activities are generally so well-hidden. But if they're doing it to affect the outcome of elections, it's no great leap to accept they're doing it to try and sell us stuff, and probably far more intensively," she says.
<h4>Individual consumers</h4>
There is little doubt that targeted advertising works, says Jake An, a post-doctoral researcher in the school of marketing at UNSW Business School.
A meta-analysis of 114 published papers looking at targeted advertising found it had a large effect on consumer behaviour.
"It's much more effective than mass advertising and equally as effective as personal selling," An says.
"From the company's perspective, targeted advertising reduces wasted advertising and there's research that shows that targeted advertising allows a match between consumers' preferences and the advertised product's attributes."
The increased amount of data available on customers is allowing advertisers to further refine their marketing efforts and target individual consumers, says An.
But far from feeling as if they are being manipulated, consumers respond well to targeted advertising and it doesn't lead to negative or defensive behaviours, according to research cited by An.
Much of the reaction is about how the targeted advertising is promoted to consumers. If consumers feel like they are getting something in return for receiving targeted advertising, such as free articles or entertainment content, they are less likely to react negatively.
It raises the question of whether this could be considered to be manipulating consumers. An agrees that targeted advertising is about manipulation, but he says it could also be considered to be about influencing.
"There's a negative connotation that, if you manipulate someone, it's to the disadvantage of the target, whereas if you're influencing the person, it has a more neutral tone to it," he says.
However, a Consumer Policy Research Centre (CPRC) survey of 1004 Australian consumers released in May 2018 indicated that while some consumers (27%) found the use of their data for delivery of customised content to be beneficial, the majority (52%) believed the monitoring of online customer behaviour for use in targeted advertising to be "unacceptable".
Manwaring says more disclosure of companies' advertising practices is needed so that consumers and regulators know the extent of any activities that could amount to manipulation. Some types of behaviour may be acceptable, while others may not.
<blockquote> 'At the moment companies can do almost anything they like with the data they collect' KAYLEEN MANWARING</blockquote>
<h4>Decision-making vulnerabilities</h4>
Presently, consumers are protected to some extent by privacy laws. However, they sign away many of these protections when they agree to a company's privacy policy in order to use their services or buy their products.
"We know that people don't read privacy policies. They often don't understand them particularly well because many are drafted very badly," she says. "I don't understand half the privacy policies that are out there, and I'm trained to read them."
This is supported by consumer responses in the CPRC report.
There is also the question of who would be disadvantaged by this. The wealthy may be able to afford premium services that would give them more control over which of their data was released and how it was used, leaving the poor, the elderly and the disabled vulnerable.
Manwaring says that where digital consumer manipulation is successful, it has the potential to conflict with some of the goals of Australian consumer protection law, particularly those relating to unfair practices, protecting vulnerable or disadvantaged consumers, and providing accessible and timely redress. It also has the potential to fetter a consumer's freedom of choice.
Regulators and society need to ask what level of protection we should have and what we see as acceptable and unacceptable practices, she says. What advertisers are presently able to do with data and the way they target and potentially manipulate consumers may not fall under the protections offered by existing consumer law.
Yet there are precedents for regulating sales and advertising techniques that target decision-making vulnerabilities. For instance, the Competition & Consumer Act regulates door-to-door sales, mandating when sales people can visit and giving consumers a 10-day 'cooling off period' in which they can change their mind and cancel an agreement.
"We've already accepted that consumers' capacity for rational decision-making is bounded. So, the question for us is, 'Where do we see the boundaries lie in relation to emerging technologies?'" Manwaring says.
"At the moment companies can do almost anything they like with the data they collect. My point is we need to have a public conversation about whether everything that they're doing with it is actually acceptable to society."

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