In the news: Datran agrees to pay $1.1 million settlement -
An interesting saga has unfolded that highlights the relationship between the incentive promotion and email marketing worlds. It began a year ago with a public letter from TRUSTe and concluded, in part, with a fine paid to the New York Attorney General’s Office. The companies at the heart of the story are Datran and Gratis Internet. The story making rounds today deals with the partial conclusion of this of this story – Datran’s million dollar settlement.
The story began with a bang – a press release on February 9, 2005 by TRUSTe announcing it had revoked Gratis Internet’s FreeiPods.com seal saying, “As of January 14, 2005, TRUSTe’s license agreement with Gratis Internet has been terminated due to violations of the privacy seal program requirements.” Two days later, though, on February 11, 2005 another release, this saying “TRUSTe and FreeiPods.com agree to work together to ensure customer privacy.” According to TRUSTe, Gratis made substantial efforts to comply, even before the initial termination; this release re-affirmed those efforts and extended a second lease on life. At some later date though, the seal was again revoked, as none of the bigger FreePay sites have it displayed.
Gratis Internet is, of course, an incentive promotion company. They have seen millions of users come through their sites, providing them with an enormous email database. This is where Datran comes in to the story. Datran has emerged over the past few years as the player to be reckoned with in email marketing. List owners turn over their lists to the company because of Datran’s ability to get into inboxes and the yields they extract per name thanks to their proprietary techniques, including triggers. Some of the largest list owners have entrusted Datran, so that Gratis Internet did too, should have raised no eyebrows. Yet it did.
Datran can be viewed in many ways as an outsourced solution. Email is a difficult business, and companies that collect email can follow two major paths. The first applies mostly to commerce sites, such as cataloguers, who stand to make more money by driving their users back to their site. This is the CRM approach. The second applies to sites that will earn more by sending third-party offers – everyone from credit card companies to lead generation sites. Third party offer marketing also looks at lifetime value but in a different fashion, which is why companies that offer CRM solutions generally don’t offer promotional email marketing services.
Many companies hand over their list to companies such as Datran to manage, so why would this relationship cause problems whereas others in the past didn’t? The answer stems from Gratis’ privacy policy which at the time forbid sharing, selling, giving, or lending customer information “for any reason.” Even though Datran acted as an extension of Gratis with respect to their email, the names still violated a policy that had already received its fair share of scrutiny. And given the size of the file, it was a perfect target for the Attorney General Office’s, a relationship they dubbed the “largest breach of privacy in Internet history.”
Gratis’ current, non-TRUSTe, privacy policy is incredibly specific and would allow for such a relationship. Unfortunately, Datran and Gratis entered into the relationship without first going over the possible implications with a fine-toothed comb. That it was merely a “breach” and not theft or overtly dubious behavior is what most likely kept the fine reasonable. Datran will as part of the settlement destroy the names it received.
Ultimately, it’s good to see that the powers that have our privacy in-mind. Whether this case is the best example to set in order to deter future breaches will be something to watch for the future. For their part, Gratis is still under investigation; so for now, the saga continues.
