Policy by the Numbers: Risks of the open Internet

Risks of the open Internet

Tuesday, May 15, 2012

In February the FTC published their yearly Consumer Sentinel Network report. The report examines the various kinds of complaints the FTC gets from consumers on the Internet. One way to think about the report is that it provides us with a key to prioritize actions—government, academia, industry, etc.—in response to risks on the open internet. The complaints included in the Sentinel Network—7 million of them from the period 2007-2011—give a helpful portrait of the online risk landscape.First, we learn that the Internet, with its vast offering, still garners fewer consumer complaints than the old telephone network. For example, in the same period internet complaints were collected, the Do Not Call Registry registered 9 million complaints. Second, the composition of the complaints helps us assess the priorities of consumers on the Internet. 55% of the complaints are about fraud. A total of 1.5 billion USD was reported to have been lost in Internet-related fraud, by the 43% of consumers that reported a loss. If all consumers who experienced a loss had reported fraud, the number could be at least double that figure. These are not small amounts: the median reported loss was around 500 USD, and the average was above 1000 USD. (For comparison it would be interesting to know what average amounts are for offline fraud). Identity theft trails fraud with 15% of complains. Together, these two concerns make up 66% of the complaints in the CSN, suggesting that government resources should be concentrated on these two issues.Third, in 2011, the CSN received 1.8 million complaints in the US. The US had 240 million internet users in 2010, indicating that 0.75% of Internet users reported to the CSN. This suggests that for the vast majority of US Internet users, their 2011 internet experience was a safe one. While this is good news, the 1.5 billion USD lost in fraud is nothing to sneeze at, however, and should be taken very seriously.Fourth, the web at large is not the primary channel for online fraud. Instead, it’s email: of the 60% of complainants that reported how they were first contacted, 43% said email. Only 13% had their initial contact through a website. The real dangers are not the web sites you visit, then, but rather unseemly messages in your inbox. Luckily, many sites have sprung up that allow you to check if the offer that seems to be too good to be true really is. The internet has its share of entrepreneurs and parasites, making trust online extremely important. The reason the Internet can carry e-commerce worth more than 180 Bn USD in the US alone is that consumers trust the network. Finding ways to inform and empower people to have trustworthy relationships matters. Given the findings of the CSN report, any agenda for improving trust should start with addressing email fraud and identity theft, ideally through research that includes crowdsourced data gathering. Eric Davis is a Policy Manager at Google.

Policy by the Numbers

Risks of the open Internet

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