Slow-Going for Web-Privacy Software
Wednesday, September 08 2010 @ 09:13 AM EDT
Contributed by: Don Winner
Overall, the Web-privacy industry remains fractured, with many free and for-purchase products tackling a range of risks. More traditional computer-security companies like Symantec Corp. are also adding online-privacy tools, damping demand for stand-alone Web-privacy services, industry experts said.
As a result, firms like VaporStream only have users numbering in the thousands. Mr. Collins, who launched Chicago-based VaporStream in 2006, acknowledged business has been slow-going. "Things are starting to come together, albeit slowly," he said. The privately held company, which declined to provide revenue figures, currently has about 5,000 users, including employees of four companies.
Mr. Collins said VaporStream faces challenges selling to both consumers and companies. When selling to consumers, the problem is convincing potential customers they are at risk. With companies, the difficulties lie in getting slow-moving information-technology departments to adopt new products and convincing potential customers that VaporStream is reliable, he said.
The hurdles facing this latest wave of Web-privacy start-ups—which aim to help people keep information about their identity, browsing activity and electronic correspondence out of the hands of marketers and other third-parties—echoes the challenge the industry has faced in the past. Earlier this decade, companies such as Privacy Inc., which provided dummy email addresses for online transactions, floundered after the dot-com bust.
Downloads of privacy software appear to be stalling. CBS Corp.'s CNET, which runs a software-downloads website, said downloads of free and for-purchase privacy software fell 16% to 3.9 million in the 12 months ended June 30 from the year-earlier period.
"People call for privacy, but they don't act accordingly" because downloading software and tweaking privacy settings is inconvenient, said Carsten Casper, an analyst at research firm Gartner.
In addition, many free privacy-protection tools and improvements to Internet browsers' privacy features are making it more difficult for companies to make money peddling Web-privacy software, industry experts said. And some people just don't trust giving their information to third-party start-ups, said IDC analyst Al Hilwa.
U.S. customers are particularly apathetic about Web privacy, said Bill Montgomery, chief executive of Connect In Private Corp., founded in 2007 and based in Panama City, Panama. The privately held company launched a service last year that routes users' Web traffic through computer servers in Canada to mask their IP addresses—the unique numbers assigned to every computer connected to the Web—for $14.99 a month. Mr. Montgomery said fewer than 5% of his company's roughly 75,000 customers are located in the U.S., with about 90% in South America, where he said residents are more concerned about government prying.
Web-privacy companies face tough competition in the sector. Lance Cottrell, chief scientist at identity-shielding service Anonymizer Inc., which is owned by Abraxas Corp., said he has noticed many new competitors in recent months. "You'll probably see a little bit of a boom and bust," he said.
Mr. Cottrell said Anonymizer's relatively long history—it was founded in 1995—is a boon and that its revenue is growing, though he declined to disclose numbers. Still, the company earlier this year revamped its software for consumers—which for $79.99 a year allows people to surf the Web through a secure connection that hides their IP addresses—in order to stay competitive, he said. The company also offers customized software for businesses starting at $500 per user annually. "It's a constant arms race," he said. Read more: http://online.wsj.com/article/SB10001424052748703946504575469621089587394.html?mod=googlenews_wsj#ixzz0ywnRhGts