The Way the Digital Cookie Crumbles

[Commentary] For a measure of how technology is changing human expectations, consider the "cookies" on your computers. These invisible text files are how websites track activity, delivering to marketers detailed information about individual behavior and preferences. In exchange for data, we get highly personalized online services. This use of cookies fuels the economics of the Web, but it has also caused anxiety as people have had to reconsider analog-era expectations of privacy to embrace digital-era benefits of sharing data.

If regulators and lawyers push too hard to limit the use of cookie data, advertising online will become less efficient. This in turn will reduce the amount of free, advertising-supported services enjoyed by consumers, such as social media, entertainment and email. Consumers seem to understand there's no such thing as a free lunch, even online: If they are not paying for a product, then for better or worse, they are the product. Each consumer should be able to decide how to make this trade-off between sharing data and getting advertising-supported services. The privacy debate shows how naive Silicon Valley firms were to sign 20-year agreements granting Washington regulators broad authority over how they operate. Digital entrepreneurs should be allowed to innovate freely, with consumers also free to choose their individual trade-off between how their data are used and the benefits they get in return. Overregulation is the way the digital cookie crumbles.