It is well understood that consumer transactions are operationalized in terms of a single utilitarian exchange where goods or services are given in return for money or other goods (Bagozzi 1975). But with the advent of commerce and other consumer activities on the Internet, a secondary exchange occurs, in which consumers also make a non-monetary, intangible exchange of their personal information (Culnan and Milberg 1998) and therefore, put their personal privacy at risk (Culnan and Bies 2003). Hence, while the Internet offers consumers access to a vast quantity of information at minimal effort and cost to enable better, more efficient decision-making (Alba et al. 1997; Bakos 1991; Widing and Talarzyk 1993), consumers are vulnerable when it comes to their online information. Many are unsure of (Sheenan and Hoy 1999) and have little control over how information is collected, stored, shared, purchased, stolen, and/or misused by government, corporate, public and private agencies, beyond the original purpose for information collection (Nowak and Phelps 1992; 1995; Milne and Culnan 2004; Buchanan et al. 2010).

Some academic studies have considered consumers’ privacy in various online settings such as web browsing and online commerce (e.g. Sheehan and Hoy 1999; Malhotra, Kim and Agarwal 2004; Buchanan et al. 2006; Eastlick, Lotz and Warrington 2006; Pan and Zinkhan 2006; Tsai et al. 2011). However, new media technologies are radically altering our social environments, including fundamental understandings of concepts such as privacy (Baym et al. 2012). Despite the rapid growth of social media in recent years, little academic research has explored consumers’ concern for privacy when choosing to sign up for and participate in social networking sites. Since Facebook’s inception in 2004, the popular social networking site has grown from just one million registered users to one billion (Zuckerberg 2012). During these eight years of explosive growth, marketers have started to realize the lucrative opportunities for brand presence and advertising on social media platforms such as Facebook (Foster, West and Francescucci 2011). Indeed, many marketers consider user information to be important in creative a competitive advantage in online environments (Andrade, Kaltcheva and Weitz 2002; Schoenbachler and Geoffrey 2002; Sijun, Beatty and Foxx 2004). The media has drawn much attention to the idea that consumers are concerned with their online privacy (Milne, Labrecque and Cromer 2009), but consumers continue to readily share their personal information. Consumers disclose personal information to social networking sites in exchange for membership and the opportunity to connect with other members. In this way, one commodity (personal information) is traded for another (membership).

Given that a major concern of many consumers is that the Internet is likely to violate users’ privacy (Maignan and Lukas 1997; Benassi 1999), it is unclear whether consumers are truly aware of, understand, or are concerned about how their personal information is being used by these social networking sites. Although the Federal Trade Commission (FTC) has established the Self-Regulatory Principles for Online Behavioral Advertising (FTC 2009), which provide suggested information disclosure policies for companies to follow, companies are not required by federal law to abide by these Principles; they are merely suggestions. The state of California has enacted the California Online Privacy Protection Act of 2003 (Cooley Godward LLP 2004), which requires commercial websites that collect personally identifiable information from users of the site who live in California to post and comply with a privacy policy. However, for websites that do disclose such information, it is unclear how the presentational mode of the privacy policies affects consumers’ perceptions of the security and usefulness of the social networking site.

The purpose of this research is to understand consumers’ concern with their privacy on social networking sites and how this concern affects consumers’ acceptance of such sites. Such research is relevant to marketing and communications scholars, in order to better understand consumer privacy, as well as to policy makers who seek to protect consumer well being.

Consumer Privacy

Consumer privacy is rooted in the work of Westin (1967), who defined privacy as individual control over disclosure and subsequent uses of their personal information. More recently, privacy has been defined as “consumers’ ability to control when, how, and to what extent their personal information is to be transmitted to others,” (Goodwin 1991; Phelps, Nowak, and Ferrell 2000; Milne and Culnan 2004). Given the above definitions, it appears that privacy can be considered a two-dimensional construct that deals with 1) control over information (i.e., disclosure) and 2) information use (i.e., intrusion). Although many consumers are unsure of how retailers collect, save, and use their personal data (Sheehan and Hoy 1999), most consumers are willing to give up some privacy simply to participate in a consumer society (Milne 2000; Phelps, Nowak, and Ferrell 2000). As such, it is increasingly apparent that personal data have become a commodity, which makes it more susceptible to exploitation.

Privacy Disclosure

Privacy disclosure can be defined as marketers’ notification of consumers about what information is collected from them and by what entity appears to allay privacy concerns (Sheehan and Hoy 2000). Marketers should disclose the uses of the information they ask consumers to provide and should provide consumers the opportunity to opt out of lists to reduce privacy concerns (Nowak and Phelps 1995). Often, marketers include privacy notices on websites to help the consumer decide whether or not to disclose information to an online marketer or to engage with the website at any level (Culnan and Milberg 1998). Such notices provide consumers with information about the organization’s information practices in attempts to reduce their perceived risk of information disclosure and build their trust (Milne and Culnan 2004).

However, privacy statements are generally written “with the threat of privacy litigations in mind rather than commitment to fair data handling practices” (Pollach 2007). In other words, companies’ privacy policies are written so that they will be covered in case of a legal dispute, not necessarily so that consumers are able to understand them. For instance, Google is a well-known search engine that organizes information and is used by Internet users in 181 countries to this access information (Google 2012). Google’s privacy policies frequently use the modality marker “may” to downplay the frequency of how many times something occurs (Bodle 2011). For example, “We [Google] may combine the information you submit under your account with information from other Google services or third parties.” Such a statement can be misleading to consumers because the use of the word “may” makes it sound like Google may or may not consumers’ information, although in reality, it is likely that they will.

Furthermore, Google articulates its privacy policy using educational, user-generated videos on its own video-streaming product, YouTube. In doing so, Google attempts to replace the official, legalistic language often used in privacy statements with a language more familiar to the average Google user. However, it can be argued that the added simplicity does not thoroughly articulate the details of Google’s privacy policies (Bodle 2011). The question remains whether the presentational mode of privacy statements and policies on social networking sites truly makes a difference in users’ awareness and understanding of the effects of sharing personal information on a social networking site.

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