Online profiling gets mixed marks in the classroom

[Gary Ruskin]

Commercial Alert 					April 10, 2000

Following is a good article on the ZapMe! Corp. from the April 17 issue
of U.S. News & World Report.
<http://www.usnews.com/usnews/issue/000417/nycu/profile.htm>.

Online profiling gets mixed marks in the classroom 
By Dana Hawkins 

	Adolescent energy fills the air in the Margaret Buerkle Middle School
library. Research projects on slavery are due tomorrow -- the last day
before spring break for the students in suburban St. Louis. After a
briefing by their social studies teacher, the seventh graders dart
across the room to claim one of 15 fully loaded computers with jumbo
monitors and high-speed Internet access. "This is a miracle," says Donna
Unterreiner, the school's librarian.

	The divinely outfitted technology lab was funded not by taxpayers but
by ZapMe! Corp. of San Ramon, Calif. "ZapMe! is cool," says 12-year-old
Amy Steward, who is finishing her project: a board game with stops on
the Underground Railroad. "I use it mostly for Internet searches." Last
spring, after voters in the middle-class Mehlville school district nixed
the third school bond issue in as many years, administrators turned to
the broadband Internet media network specializing in education. School
district officials say they understood the shiny new technology, which
they value at over $172,000, would come at a price: Flashy, MTV-esque
commercials and public-service announcements run continuously in a
corner of each computer screen. But administrators eagerly endorsed the
tradeoff and signed deal to set up computer labs in the district's five
secondary schools. 

	What school officials say they did not realize Zap Me! could do is
track students' Web-surfing and tie that to such information as names,
addresses, and perhaps even their parents' credit card numbers. "ZapMe!
only mentioned the ads. I wasn't aware they could gather personal data,"
says Yvonne Morris, the district's instructional technology director.

	Where the kids are. Increasingly, cash-strapped schools are penning
agreements with companies that may collect data from students. ZapMe!
computers are installed in 1,784 schools in 45 states, according to
corporate officials, who expect the program to be operating in 4,000
schools by year's end. Why are marketers targeting schools? "Because
that's where the kids are," says James McNeal, a professor of marketing
at Texas A&M University, who says children spent $28 billion of their
own money last year.

	While ZapMe! is leading this effort, other companies are also trading
on technology in schools. The pioneer is Channel One Network, which over
the past decade has equipped schools with televisions and cable access
to carry its commercial-filled news programs. Channel One is said to be
piloting an ad-driven Internet-access program for schools. Technology
coordinators like Morris say they're bombarded by come-ons from
companies offering computers, E-mail accounts, and database and Web-page
maintenance. Yet few of these companies take pains to keep sensitive
information out of the wrong hands.

	ZapMe!, for instance, reports in its financial filings that it tracks
users by age, gender, and ZIP code. Its contract, however, goes a step
further: "We understand that during the assignment of E-mail addresses,
user participation in contests, promotions, or programs on the network,
it may be necessary for students to give out personal information to
ZapMe! or one of the network's sponsors." Rick Inatome, CEO since
October, insists: "I can guarantee that we never tracked individual
surfing habits. We had the contractual right to do it, but we never
did." Inatome says the original corporate vision was to sell products in
schools through the "ZapMall"; reward schools and students for online
use with "ZapPoints," which could be traded in for CDs and other items;
and share students' surfing and buying habits with sponsors. "But I've
changed all that," says Inatome. "I've redefined the mission from
Internet marketing to education." Inatome says these changes will be
reflected in new school contracts this fall.

	Surfing for dollars. Yet ZapMe! has not altered its current contracts
to reflect this new focus. And there are no significant changes in
company philosophy in its latest filing with the Securities and Exchange
Commission. "It doesn't look like they've changed their business model,"
says Chris Nerney, an analyst who follows ZapMe! for the Internet Stock
Report. "The bottom line is that ZapMe! is still making most of its
money through sponsorship fees." 

	Like any Internet service provider, ZapMe! has the capability to
monitor data that pass through its network. What's different is how it
treats the information. "ZapMe! does intend to monitor the network and
compile statistics and demographics with regard to the habits, viewing
preferences, and other nonpersonal information about the network's
users," reads its contract. "It's worrisome when an ISP says it's going
to monitor Web-surfing activity, particularly if its customers are
kids," says Richard Smith, a Boston computer consultant who helped
expose how DoubleClick linked Web-surfing activity to personal user
data. The online ad firm later dropped the plan. "After the DoubleClick
controversy, I'm surprised ZapMe! planned on profiling students to show
them personalized ads."

	Cresencio Torres says he knows firsthand what can happen when schools
trade student data for technology. Last fall, an independent contractor
working as a salesman for BrainstormUSA asked teachers at San
Bernardino's Kendall Elementary School to send contest entry forms home
with students. In exchange, the company promised educational CD-ROMs to
the school. Teachers, in turn, promised licorice to students who, like
Torres's two sons, returned forms the following day. Torres says that
the BrainstormUSA salesman's pitch included high-pressure tactics. "He
said if I didn't buy my kids a computer, they'd never amount to
anything," recalls Torres. "That Hispanics would rather spend their
money on barbecue and beer than to help their children." Torres, who
says he thought the salesman was sent by the school, signed a contract
agreeing to pay $2,721 for a computer and CD-ROMs–at a 21 percent annual
interest rate. BrainstormUSA responds: "It's true we generate leads
through schools," says Joe Galluccio, the company's president. "But we
don't hard-sell, and we terminate anyone who violates our policy."

	Parental consent. Opposition to data digging at schools is creating
strange bedfellows. Commercial Alert, a Ralph Nader-backed
public-interest group, calls ZapMe! a "Trojan horse" for record
collection. Some conservative organizations, including Phyllis
Schlafly's Eagle Forum, agree. New regulations provide protections for
children (box), but these groups want more. They say parents need to act
on behalf of children who may not yet understand the value of privacy,
and they have endorsed legislation that would require parental consent
for students under 18 to give information to marketers.

	However, some groups, such as the National School Boards Association,
want to continue what they view as "productive collaboration." Says Dan
Fuller, director of federal programs for the NSBA, "Besides, it takes
school time and expense to compile parental permission slips." That
stance doesn't sit well with some parents, though. "Schools are
brokering the privacy of our kids for corporate profit and hoping to
hide it from parents," says Larry Scott, a parent who unsuccessfully
fought ZapMe!'s contract with the Hernando County, Fla., school
district. "That stinks."

	Yet the controversy surrounding Zap Me! hasn't dimmed Kristi Johnson's
enthusiasm for the computer lab at El Dorado Middle School in Concord,
Calif. "If we are a capitalist economy, why shouldn't schools benefit
from capitalism?" asks the technology coordinator, who recently traded
in her school's "ZapPoints" for such necessities as a stapler and light
bulbs. But she hesitates a moment and adds: "If kids weren't tracked so
much, that would be good, too." 

© U.S.News & World Report Inc. All rights reserved.
-------------------------
For more information about the ZapMe! Corp, see Commercial Alert's web
page on ZapMe! at <http://www.essential.org/alert/zapme/index.html>.
Commercial Alert's website is at <http://www.essential.org/alert/>.

Commercial Alert opposes corporate exploitation of children and the
excesses of commercialism, advertising and marketing.

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Gary Ruskin | Commercial Alert 
1611 Connecticut Ave. NW Suite #3A | Washington, DC 20009
Phone: (202) 296-2787 | Fax (202) 833-2406
http://www.essential.org/alert/ | mailto:gary@essential.org
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