Young American Consumers’ Online Privacy Concerns, Trust, Risk, Social Media Use, and Regulatory...

JOURNAL OF NEW COMMUNICATIONS RESEARCH | 1

Young American Consumers’ Online Privacy Concerns, Trust, Risk, Social Media Use, and Regulatory Support

By Hongwei Yang

The recent immense popularity of social networking websites (SNS) such as Facebook has raised serious concerns about the security and privacy of their users’ disclosed personal information. After trading in their valuable personal information, the subscribers of Facebook and other SNS sites can receive many benefits such as the ability to interact with friends and family freely and instantaneously throughout the world, to join various online interest groups and communities, and to use free applications and services provided through the site (Ellison, Steinfield, & Lampe, 2007). On the other hand, security, access controls, and privacy are weak by design on most SNS because their popularity and commercial value hinge upon their easy and open access to all Internet users (Shin, 2010). Since 2009, the leading social networking website, Facebook, has turned profitable by successfully utilizing the users’ profiles, social connections, and their friends’ recent activities for advertising and marketing purposes (Quinn, 2010). It is projected that US marketers will spend over $2 billion to advertise on SNS, while Facebook will receive around $1 billion from advertisers worldwide in 2011 (eMarketer, 2010). SNS sites can also generate revenues by supplying mountains of their subscribers’ personal information to marketers, recruiters, and any interested party. There exists an abuse of subscribers’ disclosed privacy information for purposes they did not approve of (O’Brien, 2010; FTC, 2010b). In addition, SNS themselves are vulnerable to various attacks from hackers and cyber predators who covet subscribers’ personal data (Chen & Shi, 2009). Adolescents and young adults are the heaviest users of SNS,


but limited studies have been conducted to examine their prior negative experience, online information privacy concerns, trust, risk, and social media use. Two Pew Internet Project surveys show that 73% of online teens and 72% of young adults use social network sites (Lenhart, Purcell, Smith, & Zickuhr, 2010). Popular media and trade press have been voicing the concerns of government and privacy advocacy groups, but they are also creating a myth that teenagers and young adults could care less about their online privacy (e.g., O’Brien, 2010; Dvorak, 2010). On the other hand, a new trend was noted that more and more young college students begin to rethink online privacy and to exercise control over their personal information on SNS (Holson & Helft, 2010). Another Pew Internet Project survey indicates that 71% of social networking users ages 18-29 had changed the privacy settings on their profile to limit what they share with others online (Madden & Smith, 2010). One of the first quantitative studies to evaluate young adults’ online privacy attitudes also concludes that young people ages 18-24 have an aspiration for increased privacy like older Americans (Hoofnagle, King, Li, & Turow, 2010). More empirical research is warranted to validate these new studies and to provide Internet companies, marketers, and government a deeper understanding of the underlying dynamics of prior negative experience, online privacy concerns, trust, risk, and social media use. In addition, little is known about young adults’ support for government and self-regulation of Internet advertising in social media in light of increasing strict government scrutiny of online behavioral advertising practices. Currently, government regulation of Internet advertising is almost invisible to American consumers as the Federal Trade Commission (FTC) endorses industry self-regulation with regards to the protection of consumer privacy on the Internet according to five fair information practice principles (FTC, 1998). Following these principles, third-party institutions such as BBBOnline and TRUSTe were established


to devise privacy regulations, dispute resolution rules, and produce verdicts that are accepted by consumers as well as businesses (Caudill & Murphy, 2000). Ten years later, dissatisfied with self-regulation of online behavioral advertising practices, the FTC (2010) proposed a possible “Do-Not-Track” legislation to Congress. To argue for or against self-regulation of social media advertising, the industry, government, and advocacy groups need to know more about young consumers’ regulatory support in relation to their prior negative experience, online privacy concerns, trust, and risk. To fill the knowledge gap, this survey study is designed to examine the relationship of young American consumers’ use of SNS, their prior negative experience of online personal information disclosure; their privacy concerns; their perceived risk of providing personal information; their trust of online companies, marketers, and laws; and their support for government and self-regulation of social media advertising. A conceptual model will be constructed and tested to find whether these factors predict young consumers’ support for government regulation and self-regulation of social media advertising.

Literature Review and Theoretical Framework

Online Information Privacy Concerns Previous studies recognize that consumers’ online privacy concerns are multi-dimensional and complicated, and various online marketing activities may evoke varying levels of concern (FTC, 1998). Smith, Milberg, and Burke (1996) found that Collection becomes consumers’ concern when they perceive that “extensive amounts of personally identifiable data are being collected and stored in databases.” Consumers are also concerned about Unauthorized secondary use, that is, “information is collected for one purpose but is used for another,


secondary purpose.” Improper access bothers consumers when “data about individuals are readily available to people not properly authorized to view or work with this data.” Consumers also worry about Error because “protections against deliberate and accidental errors in personal data are inadequate” (p. 172). Smith et al. (1996) developed a scale to measure these dimensions and validated it across the populations of students, consumers, and professionals. The validity and reliability of this instrument have been confirmed by subsequent empirical studies (e.g., Milberg, Smith, & Burke, 2000; Rose, 2006; Stewart & Segars, 2002). Following this line of research, Malhotra, Kim, and Agarwal (2004) developed a new scale to measure Internet users’ information privacy concerns and identified three Internet-specific dimensions: collection, control, and awareness of privacy practices. Based on social contract theory, they considered Internet users’ concerns about collection as “the degree to which a person is concerned about the amount of individual-specific data possessed by others relative to the value of benefits received” (p. 338). They defined control as “whether the individual has control over personal information as manifested by the existence of voice (i.e., approval, modification) or exit (i.e., opt-out)” (p. 339). Finally, they proposed a passive dimension of online consumers’ concerns about their awareness of organizational information privacy practices. Primarily based on Smith et al. (1996) and Malholtra et al. (2004), in this study, consumers’ online privacy concerns are conceptualized as the degree to which an online consumer is concerned about the collection of online personal information, unauthorized secondary use, improper access, error, the consumer’s control over the collected information, and awareness of how the collected information is used. Online information privacy concerns will be treated as a multi-dimensional construct and a second-order factor as did previous scholars (e.g., Stewart & Segars, 2002; Malhotra et al., 2004; Okazaki, Li, & Hirose, 2009).


Social Contract Theory

Social contract theory will be adopted to explain the relationship of young American consumers’ prior negative experience, online privacy concerns, perceived risk, trust, social media use, and regulatory support in this study. Social contract theory has been applied by many direct marketing scholars to examine consumers’ privacy concerns in both offline and online contexts (e.g., Culnan & Bies, 2003; Malhotra et al., 2004; Phelps, Nowak, & Ferrell, 2000; Okazaki et al., 2009). Many marketing scholars consider consumers’ exchange of personal information as an implied social contract (e.g., Culnan,1995; Milne, 1997; Milne & Gordon, 1993). From this perspective, a social contract is formed whenever a consumer provides a marketer with personal information on the Internet in exchange for any incentive (including free convenient services of SNS). The consumer expects that their personal information will be managed responsibly. The implied contract will be regarded as “fair” if the marketer complies with FTC’s five fair information practice principles, and the consumer has reasonable control over their personal information collected by the marketer (Culnan, 1995). The contract will be breached by the marketer if a consumer’s personal information is collected without his knowledge or consent, if his personal information is provided to a third party without permission, if his personal information is used for any other purpose not agreed upon by him, if the accuracy of his personal data is not safeguarded, if he is not offered an opportunity to opt out, or if he is not informed of the firm’s privacy policy (Phelps et al., 2000). So, when none of the above improper behavior occurs, consumers’ privacy is protected, but when consumer control is lost or reduced involuntarily after and beyond a marketing transaction, his privacy will be invaded (Culnan, 1993; Milne & Gordon, 1993, Simitis, 1987). Similarly, Malhotra et al.


(2004) argue that a marketer’s online collection of consumer personal information is considered “fair” if only the consumer is given control over the information and informed of how the information will be used for what purpose. This study assumes that most consumers would like to have more control and their privacy concerns will be mitigated after gaining more control over how information about them is collected and used (Phelps et al., 2000). Okazaki et al. (2009) extended social contract theory to mobile advertising by incorporating trust, risk, and consumer regulatory preference. They argue that consumers have invested their trust in the marketer when they expect that the marketer will respect and protect the personal information provided voluntarily in exchange for relevant services. Consumers also trust that the marketer will not use their personal information beyond mutually agreed purposes. However, consumers will often feel at some risk by providing their personal information to the marketer whom they cannot know personally. When the marketer’s abuse of their personal information occurs, regulatory control mechanisms should be called upon to keep order. Then consumers have to decide whether they prefer government regulation or industry self-regulation. In a similar manner, this study adopts social contract theory to connect young American consumers’ prior negative experience, privacy concerns, perceived risk, trust, and regulatory support for social media advertising.

Prior Negative Experience and Privacy Concerns Previous studies proved that prior negative experience in personal information disclosure could significantly increase consumers’ information privacy concerns in both online and offline contexts (e.g., Bansal, Zahedi, & Gefen, 2010; Culnan, 1993; Okazaki et al., 2009). After consumers realized that personal information was misused without authorization by marketers, they will consider it a breach of the implied social contract.


Consequently, their information privacy concerns will be aggravated as their risk perceptions in dealing with online companies are heightened and their trust is seriously undermined (Pavlou & Gefen, 2005). Internet marketing scholars provided considerable empirical evidence to treat consumers’ online privacy concerns as barriers to consumer’s participation in Internet marketing and e-commerce (e.g., Sheehan & Hoy, 1999; Cho & Cheon, 2004). Past research also shows that Internet users will take coping measures to address their heightened privacy concerns after they find that an implied social contract is breached by SNS (e.g., Son & Kim, 2008). Among other things, when Internet users perceive that their personal information is mishandled, they will refrain from patronizing these SNS. Therefore, we propose the following hypotheses:

H1: Young American consumers’ prior negative experience in online personal information disclosure will significantly increase their online information privacy concerns.

H2: Young American consumers’ prior negative experience in online personal information disclosure will significantly reduce their time spent on social networking websites.

Perceived Trust and Risk Trust is conceptualized as the degree to which Internet users believe online companies, marketers, and laws are dependable in protecting consumers’ personal information (Malhotra et al., 2004). In addition, Internet users reasonably expect that online companies and marketers will abide by privacy laws and use their disclosed personal information only for the approved purpose(s). From a social contract perspective, when parties involve in a contractual relationship, one party must assume that the other will act responsibly to fulfill its promises


(Okazaki et al., 2009). In this sense, consumers often give online companies a confidence vote before providing their personal information. However, their trust needs to be earned by reducing consumers’ online privacy concerns. Studies of e-commerce and Internet marketing show that addressing consumers’ online privacy concerns helps build their trust of online companies (e.g., Rifon, LaRose, & Choi, 2005). On the other hand, Metzger (2004) found that Internet users’ privacy concerns negatively influenced their trust in websites. Similarly, other studies revealed that consumers’ information privacy concerns negatively affected their trust in online companies’ commitment to protect their personal information (e.g., Malhotra et al., 2004) and their trust in mobile advertisers’ proper handling of their personal information (Okazaki et al., 2009). Hence, it is posited that:

H3: Young American consumers’ online privacy concerns will negatively affect their trust in online companies, marketers, and laws to protect their online privacy.

Perceived risk in this study is defined as the extent to which Internet users are uncertain about the negative consequences of providing personal information to online companies and marketers (Okazaki et al., 2009; Pavlou, 2003). Because of the impersonal and distant nature of e-commerce and Internet marketing, Internet users feel at risk when online companies behave in opportunistic manner by mishandling their personal information. In addition, considering various security threats to online companies’ databases, Internet users are also uncertain whether their personal information will be leaked, breached, or stolen by hackers (Pavlou, 2003). Several studies provided empirical evidence that consumers’ perceived risk will be exacerbated by their elevated information privacy concerns (e.g., Malhotra et al., 2004; Okazaki et al.,


2009). It is reasonable to assume that:

H4: Young American consumers’ online privacy concerns will increase their perceived risk in providing personal information on the web.

Previous studies also suggest that trust can mitigate their perceived risk of disclosing personal information to direct marketers and conducting online transactions and thus reduce consumers’ uncertainty of participating in e-commerce and interactive marketing activities (Jarvenpaa & Tractinsky, 1999; McKnight, Choudhury, & Kacmar, 2002; Malhotra et al., 2004; Pavlou, 2003; Okazaki et al., 2009). So, the following hypothesis is formulated:

H5: Young American consumers’ trust in online companies, marketers, and laws to protect online privacy will significantly decrease their perceive risk of disclosing personal information online.

Trust, Risk, and Support for Regulatory Control The U.S. government resorts to self-regulatory mechanisms of voluntary control and self- help to give consumers procedural rights to control their online personal information (Rose, 2006). The FTC (1998, 2009) issued six fair information principles and Self-Regulatory Principles for Online Behavioral Advertising to encourage self-regulation of online companies and Internet marketers. This study focuses on young consumers’ support for government and self-regulation of social media advertising, a special form of online behavioral advertising. If online companies and Internet markers act responsibly and comply with the FTC self-regulatory rules, the implied social contract with consumers will be honored and trust will be gained. In turn, consumers will be generous and support granting the industry’s procedural rights to


implement self-regulation. This is validated when Okazaki et al. (2009) found that wireless subscribers with trust preferred less strict control of mobile advertising. So, this study expects that:

H6: Young American consumers’ trust of online companies, marketers, and laws to protect their personal information will positively predict their support for self-regulation of social media advertising.

On the other hand, when consumers are not sure about the security of and control over their online personal information, they would prefer stricter or even centralized regulation. Following a bad experience of privacy invasion, they would certainly perceive a very high risk of online self-disclosure. Consequently, they would probably support government regulation to seek justice (Culnan & Bies, 2003) and/or power balance (Lwin, Wirtz, & Williams, 2007). This assumption was empirically supported by a recent study of mobile advertising (Okazaki et al., 2009). Therefore, this study postulates that:

H7: Young American consumers’ perceived risk of self-disclosure online will positively predict their support for government regulation of social media advertising.

Trust, Risk and Social Media Use The current literature indicates that perceived risk inhibits Internet users from engaging in online transactions and marketing activities, but trust can be built to reduce consumers’ risk perceptions to encourage their use of e-commerce and Internet marketing (e.g., Cases, 2002; Comegys, Hannula, & Väisänen, 2009; Miyazaki & Fernandez, 2001; Pavlou, 2003). Marketing researchers also found that perceived risk negatively affected Internet users’ willingness to disclose valuable personal information to online companies and marketers (e.g., LaRose & Rifon, 2007; Olivero


& Lunt, 2004). At the same time, consumer trust positively reinforces Internet users’ willingness of self-disclosure (e.g., Metzger, 2004; Rifon, LaRose, & Choi, 2005 ). Because of open and easy access to SNS, their users take many risks including personal communication being publicly disseminated, personal information and images being divulged and hacked, and unauthorized use of personal information by third parties (Rosenblum, 2007). In this sense, Internet users with heightened risk perceptions should reduce their use of SNS. On the other hand, trust in SNS contributes to Internet users’ favorable attitudes toward SNS and thus influences their intention to use SNS (Shin, 2010). Moreover, Fogel and Nehmad (2009) found that those who had social networking profiles had significantly greater trust in Facebook than those who did not have any. Hence, it is expected that:

H8: Young American consumers’ trust in online companies, marketers and laws to protect their privacy will significantly increase their use of social networking websites.

H9: Young American consumers’ perceived risk of online disclosure will negatively affect their use of social networking websites.

Based on social contract theory and previous studies, a research model is proposed to summarize nine hypotheses as shown in Figure 1.

Method An e-mail containing a cover letter and a link to the web survey on Surveymonkey.com was sent to 2,500 randomly selected college students at a mid-sized public university in the southeastern United States in October, 2010. A college student sample is suitable for this study because


well-educated young adults are more likely to use the Internet and social media (Lenhart, 2000; Lenhart et al., 2010; Rainie et al., 2003). To boost the response rate, incentives were conspicuously announced in the subject title of the e-mail that three respondents would receive a $100 and two $50 Amazon.com online gift certificates. Cash and non-cash incentives can significantly increase the response rates of both mail surveys and Web-based surveys (Cobanoglu & Cobanoglu, 2003; Dillman, 2007).

Figure 1. Research Model of Online Privacy Concerns, Social Media Use, and Regulatory Support

The online survey consists of 38 questions, including 2 questions about their use of social networking and blogging websites; a 4-item scale of Internet users’ prior negative experience (Cho et al., 2004); Smith et

Collection

UnauthorizedSecondary

Use

ImproperAccess

Error

Control

Awareness

PriorNegative

Experience

Trust

PerceivedRisk

OnlineInformation

Privacy Concerns

Self-Regulationof

Social MediaAdvertising

GovernmentRegulation ofSocial MediaAdvertising

Social Media Use

H1 (+)

H2 (-)

H3 (-)

H4 (+)

H5 (-)

H6 (+)

H7 (+)

H8 (+)

H9 (-)


al.’s (1996) 15-item scale of concerns for information privacy (CFIP); Malhotra et al.’s (2004) 10-item scale of Internet users’ information privacy concerns (IUIPC); Merisavo et al.’s (2007) 3-item adapted scale of Internet users’ trust of online companies, marketers, and laws; two measures of consumer support for government regulation and self-regulation of social media advertising adapted from Barksdale et al. (1982); and demographic questions. Most measures are 5-point Likert scales, except social media use and demographic questions. It took 10 days and three emailings to collect 403 completed usable questionnaires with no missing data. With SPSS-19 and AMOS-19, the survey data were subject to statistical analyses including reliability analysis, confirmatory factory analysis, principal axis factoring analysis, and structural equation modeling.

Results

Four hundred three college students voluntarily participated in the web survey. The response rate is 16.1%. One hundred twenty-six respondents (31.3%) are male and 277 female (68.7%). The mean age of the sample is 21 with a standard deviation of 3.5, and respondents’ ages range from 17-35. As for the typical daily use of SNS, respondents spent an average of 125.7 minutes on SNS with the standard deviation of 109.3 (the median = 120 minutes and the mode = 60 minutes).


Table 1. Scale Reliability and EFA Results

Construct Cronbach α Variance Explained

Prior negative experience

.790 50.2%

Collection (IUIPC & CFIP)

.832 57.2%

Control (IUIPC) .671 43.1%

Awareness (IUIPC) .778 55.5%

Unauthorized secondary use (CFIP)

.851 59.2%

Improper access (CFIP) .835 63.4%

Error (CFIP) .889 67.3%

IUIPC .850 48.0%

CFIP .889 60.6%

IUPIC + CFIP .907 56.5%

Trust .744 52.8%

Perceived risk .845 55.8%

Note: IUIPC = Internet Users’ Information Privacy Concerns. CFIP = Concern for Information Privacy. Variance Explained = Extraction sums of squared loadings of principal axis factoring. N = 403.

Table 1 presents Cronbach coefficients (α) of all scales and results of exploratory factor analyses (principle axis factoring with varimax rotation). A liberal minimum requirement for scale reliability is 0.60 (Churchill, 1979; Peter, 1979), while some scholars recommend


a stricter minimum requirement of 0.70 (e.g., Nunnally & Bernstein, 1994). Therefore, the performance of all scales except the control subscale can be considered quite satisfactory. However, the control subscale and IUIPC scale did not demonstrate an extracted variance above the 0.50 recommended level (Fornell & Larcker, 1981). Further analysis and validation are warranted. A principal axis factoring analysis with direct oblimin (non-orthogonal) rotation was run to determine the dimensionality of Internet users’ information privacy concerns as the six factors are all significantly correlated (Zuccaro, 2010). The rotated solution retained four factors: privacy practices, error, collection, and control. Accordingly, a new CFIP scale and two new IUIPC scales were created: the new CFIP scale combined the original measures of unauthorized secondary use and improper access into a subscale; one IUIPC scale consists of these four factors and another scale includes four factors but three measures of awareness were eliminated because their loadings are below .50 (Costello & Osborne, 2005). Then, confirmatory factor analyses were conducted to compare the fitness indices of these scales with AMOS. The results show that the measurement model of CFIP excelled on all five important fitness indexes: χ2 = 260.45, df = 87, p < .01; Normed χ2 = 2.99; RMSEA = 0.070; TLI = 0.938; CFI = 0.948 even though the combined IUIPC + CFIP scale also performed well on three criteria: χ2 = 540.75, df = 183, p < .01; Normed χ2 = 2.96; RMSEA = 0.070. Therefore, the CFIP model is considered the most parsimonious and satisfactory model that met four conventional standards very closely: the normed chi-square (the model chi-square divided by the degree of freedom) in the 2:1 or 3:1 range (Carmines & McIver, 1981); the Root Mean Square Error of Approximation (RMSEA) ≤ .06; Tucker-Lewis Index (TLI) ≥ .95; and Comparative Fit Index (CFI) ≥ .90 (Hu & Bentler, 1999; Schumacker & Lomax, 2004). Accordingly, the CFIP scale can serve as the best measure


of Internet users’ information privacy concerns. The maximum likelihood method of structural equation modeling was adopted to fit the research model of Figure 1 to the survey data. Figure 2 presents the tested model with standardized path estimates, critical ratios, and fitness indexes. The research model has achieved a good fit as the normed chi-square falls between 2:1 and 3:1 range (Carmines & McIver, 1981), the RMSEA is smaller than the recommended cutoff value of .06 (Hu & Bentler, 1999), and the CFI exceeds the conventional standard of .90. The TLI is below .95 probably because it penalized the complexity of the tested model. Besides, Marsh, Hau, and Wen (2004) argue that the cutoff value of .95 for the TLI is too stringent for hypothesis testing. Therefore, this model is deemed very acceptable. The path estimates shown in Figure 2 supported Hypothesis 1 and 2. Young American consumers’ prior negative experience in online information disclosure strongly increased their online information privacy concerns and also reduced their time spent on SNS. Hypothesis 3 was supported that young American consumers’ online privacy concerns considerably undermined their trust in online companies, marketers, and laws to protect online privacy. At the same time, young American consumers’ online privacy concerns greatly heightened their perceived risk of disclosing personal information online. So, Hypothesis 4 was supported. However, their trust in online companies and marketers could mitigate their perceived risk markedly. Hence, Hypothesis 5 was also supported.


Collection

UnauthorizedSecondary

Use

ImproperAccess

Error

PriorNegative

Experience

Trust

PerceivedRisk

OnlineInformation

Privacy Concerns

Self-Regulationof

Social MediaAdvertising

GovernmentRegulation ofSocial MediaAdvertising

Social Media Use

.50 (8.78**)

-.19(-3.60**)

-.12 (-2.22*)

.00 (.01)

.13 (2.40*)

.01 (.25)

-.11 (-2.03*)

.25 (4.93**)

.43

.85

.99

.36 (5.91**)

.50

Figure 2. The Tested Structural Equation Model: Standardized Path Estimates

Note: Significance of the path estimates are shown in parentheses (critical ratio):*p < .05, **p < .01. N = 403.Model fit: χ2 = 817.323, df = 393, p < .01; Normed χ2 = 2.08; RMSEA = 0.052; TLI = 0.918; CFI = 0.925.

The model testing results evidently affirmed Hypothesis 6 and 7. Young American consumers’ trust in online companies, marketers, and laws to protect online privacy indeed strengthened their support for self-regulation of social media advertising. On the other hand, their perceived risk lent them more support for government regulation of social media advertising. However, Hypothesis 8 and 9 were both rejected. No evidence in the survey data supports that young American consumers’ trust and perceived risk influenced their daily use of SNS.

Discussion and Implications Based on social contract theory and previous studies (Malhotra et al., 2004; Okazaki et al., 2009), this study tested the research model


of consumers’ prior negative experience, online privacy concerns, trust, risk, and regulatory support in relation to social media use. It empirically connects prior negative experience, social media use, online information privacy concerns, perceived trust, risk, and support for Internet advertising regulation. The results indicate that young American consumers’ social media use will be negatively influenced by their prior negative experience of online personal information disclosure. This model is useful for social media researchers, policy makers, and Internet industry practitioners. The study shows that Smith et al.’s (1996) CFIP scale outperformed Malhotra et al.’s (2004) IUIPC scale when measuring Internet users’ information privacy concerns. This finding is not surprising as the CFIP scale was validated by previous studies (e.g., Milberg et al., 2000; Rose, 2006; Stewart & Segars, 2002). The IUIPC scale was only adopted by Okazaki et al. (2009) to measure mobile phone users’ information privacy concerns. Therefore, it suggests that the CFIP scale is probably a better scale to measure Internet users’ information privacy concerns than the IUIPC scale. In other words, Internet users are more worried about collection of personal information, unauthorized secondary use, improper access to the collected online data or security, and inaccuracy of online personal databases than the control over their online personal information and awareness of online companies’ privacy policies. This study discovers that young American consumers’ prior negative experience of online disclosure significantly increased their online information privacy concerns and also reduced their time spent on SNS. This finding is consistent with previous studies (e.g., Bansal et al., 2010; Son & Kim, 2008). Apparently, young American consumers consider their prior negative experience as Internet marketers’ breach of an implied social contract. To protect themselves, they spend less time using SNS. SNS owners, operators, and online marketers should use caution when monetizing subscribers’ profiles by targeting ads to them


or supplying their data to third parties. Once these subscribers perceive the abuse or misuse of their online privacy, they will probably refrain from and even discontinue visiting SNS. Frequent visitors who spend considerable time on SNS will be a more valuable target audience to Internet marketers. In this sense, SNS owners and operators should take consumers’ complaints about invasion of privacy seriously. These worried and dissatisfied users will not only turn into infrequent visitors but also spread negative word-of-mouth (WOM) complaints to their friends. In addition, they will also falsify their personal information and/or report the abuse to authorities (Son & Kim, 2008). The model testing demonstrates that young American consumers’ online privacy concerns can intensify their perceived risk of online disclosure while undermining their trust of online companies, marketers, and laws. Fortunately, their perceived risk can be significantly reduced by their trust in online companies, marketers, and laws to protect privacy. These findings validate previous studies of e-commerce and interactive marketing (e.g., Jarvenpaa et al., 1999; McKnight et al., 2002; Malhotra et al., 2004; Metzger, 2004; Pavlou, 2003; Okazaki et al., 2009). There are important implications for Internet companies and marketers. Both the industry and academia should recognize that current young Internet users are still very much concerned about online privacy (group mean = 4.18 on a scale of 1-5). Specifically, they are highly worried about data collection, unauthorized secondary use of online personal information, improper access to collected personal data, and inaccuracy of online databases. However, the good news is that the initial trust of young American consumers in online companies, marketers, and laws is high (mean = 4.84, mode = 5 on a scale of 1-5). Online companies and marketers should take measures to retain their trust and to alleviate young Internet users’ perceived risk. For example, online companies and marketers are recommended to disclose their online privacy policy conspicuously


on their websites, before or after Internet users provide their personal information (Miyazaki, 2008). It is also a smart trust-building strategy to monitor consumers’ complaints of online privacy invasion and make necessary adjustments immediately. For example, in 2006, due to users’ protests, Facebook CEO Mark Zuckerberg apologized for the features of News Feed and Mini Feed and then provided a wider variety of privacy preferences to block from feeds and control what might be pushed to whom (Hoadley et al., 2010). Online companies and marketers can also gain consumers’ trust and reduce perceived risk by seeking a privacy seal from third party institutions such as BBBOnline and TRUSTe (Rifon et al., 2005). This study found that young American consumers’ trust enhanced their support for self-regulation of social media advertising while their heightened risk led to support for government regulation. It makes sense. Young American consumers will kindly allow social media companies and marketers to self-regulate if they trust that the implied social contract will be honored and their online personal information protected properly by them. However, when they are afraid that the implied social contract will be breached after disclosing personal information online, they will be more inclined to seek government control to address their online privacy concerns. These findings suggest that to win young Internet users’ trust and reduce their perceived risk of online disclosure can build up public support for self-regulation of social media advertising while weakening their support for government scrutiny. Online companies and marketers usually prefer self-regulation as it can often improve business efficiency, productivity, and profitability. Therefore, the industry should honestly implement their online privacy policies and follow the best practices with the long term goal of warding off government regulation. Targeted advertising will certainly lose effectiveness if Congress passes the Do-Not-Track legislation to regulate online behavioral advertising.


Internet companies and marketers should make more systematic efforts to gain Internet users’ trust and reduce their perceived risk in hopes that consumers will not embrace stricter governmental control. It bodes very well for social media companies and marketers that young American consumers’ trust and perceived risk do not influence their daily social media use. The findings did not confirm past research (e.g., Fogel & Nehmad, 2009; LaRose & Rifon, 2007; Metzger, 2004; Olivero & Lunt, 2004; Rifon et al., 2005; Shin, 2010). Young American consumers are obviously concerned about their online privacy, but they tend to trust online companies, marketers, and laws to protect privacy while perceiving a moderate level of risk in disclosing personal information online (mean = 3.55 on a scale of 1-5). They will probably stay if social media companies and marketers conduct their business in good faith to honor the implied social contract. Until they have a negative experience of online privacy invasion, they will continue to take advantage of many benefits provided by SNS. A majority of them (52.4%) have not yet encountered some kind of online privacy invasion. Internet companies and marketers should minimize the incidents of online privacy invasion in the future, especially in light of young consumers’ new trend of protecting online privacy proactively.

Conclusion

This study has empirically tested the research model of consumers’ prior negative experience, online privacy concerns, trust, risk, social media use, and regulatory support. It shows that young American consumers’ prior negative experience of online disclosure can significantly increase their online privacy concerns. Their perceived risk will be elevated and trust eroded as a result of heighted online privacy concerns. Their perceived risk can build up their support for government regulation of


social media advertising, while their trust of online companies, marketers, and laws to protect online privacy can enhance their support for industry self-regulation. The results confirm that young Internet users are very concerned about data collection, unauthorized secondary use, improper access to collected online data, and inaccuracy of online personal databases. However, only prior negative experience of online disclosure would restrain young Americans from using SNS.

Limitations and Future Research External validity of the current study should be strengthened by future research as the survey data were collected from a random sample of college students at a mid-sized Southeastern public university. Even if no gender difference was identified in young American consumers’ online privacy concerns, future research should include more males as the majority of participants (68.7%) is female in this study. Based on the current literature, future scholars should investigate the influence of other factors on social media users’ online privacy concerns and the relation of these factors to perceived trust and risk, such as sensitivity of information disclosed, familiarity with entity, and compensation. Further studies should also examine whether social media users’ online privacy concerns, trust, and perceived risks predict their privacy protection behaviors including refusal, misrepresentation, removal, negative word-of-mouth, complaining directly to online companies, and complaining indirectly to third-party organizations. The relationship of social media users’ online privacy concerns, trust, risk, willingness, and behavior to disclose personal information is worth exploring. Finally, it will be interesting to study these topics in a cross-cultural context.


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Hongwei Yang (PhD, Southern Illinois University) is an Assistant Professor of Advertising in the Department of Communication at Appalachian State University. Hongwei Yang is keenly interested in advertising via new media such as the Internet, mobile devices, and social media. He has published research in International Journal of Mobile Marketing, Chinese Journal of Communication, Journal of Targeting, Measurement and Analysis for Marketing, Asia Pacific Journal of Marketing and Logistics, and Journal of International Consumer Marketing.

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