Changes and Challenges: The Internet at 33

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by Jeff Ubois

Changes in the online population, the e-business environment, and the range of services available online will shape the experience of the growing number of Americans who now routinely communicate, shop, and get information on the Web. Although consumer safeguards are improving, there is also an evolving set of online hazards ranging from confusing and inaccurate information to outright fraud, which is at an all-time high.

The novelty of the Web may be wearing off somewhat, but the majority of Americans — nearly 150 million — are now online, and two million more are getting online every month, according to data from the U.S. Department of Commerce. Among the fastest growing segments are the the young and the old; 75 percent of 14- to 17-year-olds are now online, and as the population of baby boomers continues to expand, so, too, does the percentage of people over age 50 online. This segment of users represented nearly a quarter of all those online in 2000, up from less than 20 percent three years earlier, according to the U.S. Department of Commerce.

The expanding online population represents an enormous market for e-businesses. Despite some hard times for online retailers in the last two years, the number of transactions done online is growing fast: in 2001, more than 58 million Americans made online purchases, up from 40 million in 2000, according to a study released in March 2002 by the Pew Internet & American Life Project in Washington, D.C. [The Pew Charitable Trusts, the primary funder of the Pew Internet & American Life Project, is also a funder of Consumer Reports WebWatch.]

In addition to making purchases, consumers are basing critical decisions about health, finance, employment, travel, and big-ticket item purchases using information gathered online, which makes trust and credibility on the Web increasingly important.

“People are doing more serious things online now because they have found it is a real time saver. But it is the use [of the Web] by trusted friends that is driving the expansion in online transactions,” says John Horrigan, a senior research specialist with the Pew Internet & American Life Project.

While e-mail remains the most popular online function for most users, the growing power of the network and computers connected to it are opening up new applications such as music and video. Incredibly, the power of computers connected to the network, and the number of Web pages, continues to double every few months. Today, there is more computing power in the average home PC than was connected to the entire Internet when the network was first turned on in 1969 as an experiment in advanced computer communications.

New Challenges for Consumers

With the expansion in Internet use, however, has come a new set of issues for consumers.

Fraud continues to be a growing concern, although there is no central authority or governing body that handles all complaints, and merchants are distributed around the world. This fractional system of monitoring complaints makes tallying a total dollar amount for online fraud a difficult task, according to Susan Grant, director of the Internet Fraud Watch, a project of the National Consumers League in Washington, D.C.

What can be known, Grant says, are the most common types of fraud, the average loss reported, and the age of the victims. (Click here for that information.)

Online auctions are the leading source of complaints. The Federal Trade Commission reports that complaints of fraud and abuse related to online auctions climbed to 20,433 in 2001, up from 100 in 1997.

Grant emphasizes that buyers should get the seller’s real name and address, and check the feedback about a seller provided by other buyers. For its part, the FTC has condensed its advice into Internet Auctions: A Guide for Buyers and Sellers.

Though auctions are far from the only cause for concern, it’s worth noting that some risks are more illusory than real. In particular, credit card fraud is something that experts say is still embedded more in fear than in reality. “With widespread use of basic technology, credit card theft is unlikely, but the fear persists,” says Grant.

In fact, payment by credit card is often safer than other methods because credit card companies will investigate fraudulent charge disputes.

“How you pay for things online makes a huge difference,” Grant says. “We are starting to see in telemarketing and Internet fraud the use of debit cards, bank drafts, and demand drafts, and the problem with these other payment methods is that you don’t have the same dispute rights — the money is taken out of your account and you are in a less advantageous position.”

Verifying Information Online

More subtle, but perhaps more important than fraud, is contradictory and confusing information. As Mark Twain noted, “A lie can travel halfway around the world while the truth is putting on its shoes,” and that has never more been more true than on the Internet. Verifying information on the Net isn’t always easy.

For example, few decisions are more critical than those related to personal health, and the Internet has literally millions of pages devoted to health information. While some of this information can be tremendously useful, there is no single standard or organization that verifies the accuracy of this information. So consumers are on their own.

“This year nearly 100 million Americans will go online in search of health-related information, and more than 70 percent say online health information has influenced a decision about their treatment,” says Sam Karp, Chief Information Officer of the California Healthcare Foundation in Oakland, Calif. But Karp also warned about incomplete health information online, noting that “although the accuracy of information presented was fairly high, many of the sites contained contradictory information.”

As businesses come to use the Internet to distribute information and advertising about their products, consumers will be increasingly forced to sort fact from fiction. Fortunately, the Internet provides some ways to do just that. Despite the new and sometimes difficult problems faced by consumers on the Internet, there has never been a medium that makes it easier for buyers to gather information about their purchases, to share their experiences with a large community of people, and when necessary, to fight back.

New Remedies for New Ills

In markets where the ability to easily gather information about purchases is crucial, such as financial services and travel, Internet businesses have taken off. By opening online trading and reservations systems to direct access by consumers, brokerages and travel services have transformed their operations.

Equally important, consumers now talk with each other, and share the experiences they have had with different suppliers, products, and services. Eopinions.com and other online communities aid in this effort. Though consumers have been sharing information with each other using online services, both on and off the Internet, for years, the information available has grown to the point where there are few potential purchases that can’t be informed by an online search.

In addition, a growing number of sites that provide information from multiple suppliers — eBay.com for example — allow buyers to rate the performance of the merchants on their sites. While these rating systems are imperfect, they are a step toward potentially reducing risks to buyers.

A set of solutions to problems of trust online still need to come from firms that recognize the limits on how far marketers can go before they alienate consumers. “Marketers pay for what is free on the Internet, but advertising has to be based on consumer trust,” says Greg Stuart, CEO of the Interactive Advertising Bureau of New York, N.Y. Larger companies are concerned that bad practices could erode that trust, he says.

“Spam is a nightmare. It is going to ruin everything for e-mail marketers — they are in big, big trouble,” he explains. “No one has stepped forward to do enough about that.”

Indeed, online reputation management is now a concern of many organizations. “Legitimate merchants are concerned about their image,” Grant says, and actions that undermine the trust of the online buying process are bad for them. A concerted effort to establish reputable practices online could be good for the rest of us.