Privacy is key to new social networking site, Kaioo

By Doreen Carvajal
Published: December 2, 2007


PARIS: As rebel cries go, Kaioo rolls off the tongue more like a yodel than a war whoop.
But the nonprofit organization - registered as a tax-exempt charity - is one of the newest members in the growing revolt against social networking sites that rummage through the personal information of members and turn it over to advertisers.
Kaioo, an invented name inspired by the Greek word for "you," is incubating a new sort of social network from a funky outpost of a former parking garage in Germany, which boasts some of the strictest data protection regulations in the world.
The founders pledge that its mission is to create an international haven from networks like Facebook and MySpace, where advertising and the sales pitch are becoming as elemental a social ritual as flirting. And Kaioo says all the profit it might make from limited advertising will be donated to charity.
"Users want to have an independent, democratic system that they feel is theirs," said Rolf Schmidt-Holtz, chief executive of the music giant Sony BMG, who is financing the initial start-up of Kaioo out of his own pocket with €500,000, or $730,000. "The biggest asset that we have is credibility and this platform can only grow if users feel that this is real and totally independent."
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The November start of its online network, www.kaioo.com, coincided with an autumn backlash against Facebook. The fast-growing social network last week bowed to a petition drive of thousands of users demanding easy controls to opt out of new behavior targeting systems that track their off-site shopping and enable advertisers to alert friends on their network about the purchases - essentially turning members into pitchmen.
In the United States, the Electronic Privacy Information Center and the Center for Digital Democracy are both preparing complaints about the practice for the Federal Trade Commission. In Britain - where Facebook attracted more than eight million unique users in October - government data protection authorities are investigating a user's complaint that it is impossible to completely delete accounts because the system permits only "deactivation," meaning profiles linger on the servers.
"Most people on social network sites are not aware of the audience that their data is available to," said Giles Hogben, who is editor of a report on the phenomenon for the European Network and Information Security Agency, or Enisa, advisers to the European Commission. "They encourage people to feel that they're among an intimate set of friends when in fact there could be millions of people reading what they do."
In October, the agency urged an update of European privacy regulations to take into account the emergence of social networks as huge digital warehouses of private information.
A European Commission panel of national privacy experts, headed by the German data protection commissioner, Peter Schaar, are meeting Tuesday in Brussels to settle on its agenda for the next two years. A review of sophisticated data gathering systems or behavioral targeting developed by Facebook and MySpace is likely, according to Hans Tischler, a spokesman for Schaar. "This is only a recent development and it's a very sophisticated way of advertising," said Tischler, who noted that it was too early to say how and when the group would deal with the issue, "but this topic is too important to ignore."
American privacy groups are actually pressing to influence the European panel because they believe they stand a better chance of shaping more aggressive regulations that ultimately could have a global effect.
"What most people don't realize is that a very powerful mechanism - a kind of stealth infrastructure - has been placed at the heart of the digital media experience," said Jeffrey Chester, founder and executive director of the Center for Digital Democracy in Washington. "It's a system to collect a huge amount of data about each and every one of us, to track us wherever we go and to target us."
The backlash against these emerging systems is manifesting itself in different ways. Thousands of Facebook users have signed a petition criticizing behavioral marketing and consumer groups are pressing for a "do-not-track" list for Internet users who want to end monitoring of their online activities to exploit personal endorsements for products.
But those personal recommendations remain highly seductive to advertisers. A November survey of 4,000 consumers in four European countries - Germany, Italy, Spain and France - underlines the impact. Personal recommendations are worth five times the value of advertising, according to the survey conducted by Weber Shandwick and Paul Marsden, because half of the time people follow through on individual endorsements and make purchases.
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With computer users becoming unwitting cogs in a virtual advertising machine, organizers of Kaioo decided that the time was right to start an alternative social networking site. On the site's home page, the founders make an emphatic promise: "User data will not be shared with third parties!" And they make another unusual pledge: "All advertising money goes to charity!"
The project, based in Hamburg, is the brainchild of Thomas Kreye, who approached Schmidt-Holtz this year with the idea while he was still a business development executive at the German media company Bertelsmann, a partner in the Sony BMG joint venture.
The project started last month in German and English versions. Schmidt-Holtz said his ambition was global though, and versions in five other languages, including Spanish and French, are in the works.
Schmidt-Holtz said he was talking to potential advertisers and lining up musical acts for interviews, live streaming music or free song downloads. But he underlines that he is recruiting a broad group of artists from different companies so that the project is not considered the preserve of Sony BMG.
"We are independent," Schmidt-Holtz said. "Privacy and protection of data are some of our highest goals."
Those declarations are steps forward, according to privacy advocates, but they say that more could be done.
Hogben, of Enisa, praised Kaioo "because it provides a lot more transparency." Still, his agency is pressing for even more freedom: a system of "portable data" that would allow users to shift data profiles from one social network to another.
In the meantime, about 5,000 users have signed up to Kaioo in its first weeks of life, most of them in Germany. Schmidt-Holtz remains heartened by the response. "The bloggers are normally critical people and they don't like anything," he said. "But we even have people who want to work with us. It's really amazing."