Getting Paid For Personal Data
I do not plan to read Jaron Lanier’s book, “Who Owns the Future?“, owing to its less than positive review in the Globe & Mail. All the same, the premise that there are a range of business models that are getting a free ride on gratuitously provided user data deserves consideration. Just yesterday MIT Technology Review explored the idea in an article by Antonio Regalado and Jessica Leber about Intel’s initiatives to return some control over personal data to individuals. The idea that individuals should be wary of releasing personal information to others has been well explored; the newer notion is that the monetary value of this data is something for which individuals should be paid. Whether its an expectation of payment to the data-providing users or growing concern over privacy issues, companies that depend on derived data about users preferences and habits could find their business models at risk.
The direct and indirect methods that companies use to convince themselves they know something about me make me feel, to borrow from Arlo Guthrie “…inspected, detected, infected, neglected and selected”. Every click, “like” and purchase is poured over, aggregated and sold until it seems Orwell was an optimist. But that’s just me. For all that these threats to a person’s privacy are hot topics and have been for years, the pace with which most people seem willing to yield up their secrets doesn’t seem to slacken. The lure of being able to be the mayor of the corner coffee shop seems too strong.
At the same time, users are becoming more sophisticated about what they expose, and are demanding greater control. Look at the furor over Instagram’s apparent readiness to take ownership of users’ photos; and it seems every time Facebook tries to tweak their site a storm of controversy erupts. It used to be you just clicked through the terms of service on every program you loaded; but now that boilerplate has often been made easier to parse, with plain language and visual cues directing you to the key clauses, people can actually read it. Downloading an app comes with a list of what you’re granting the app access to and it appears, anecdotally at least, people are taking note of these warnings.
Along with increased user sophistication, there is a greater likelihood people will game the system. Whereas once a person may have been thrilled to offer their TV-watching habits to the Nielsen company, nowadays if they bother to fill out a survey it will be with an eye to the likely use in mind. Consumers are happy to falsify their answers to make a point to the researcher. When rewards are offered, respondents eagerly create fictional personas to attract the surveys with better rewards. This is anecdotal again, so maybe my friends are just unscrupulous; however I’ve a feeling yours are too. So the canny market researcher has to find different ways to collect their data. But we learn a little bit about that too, and start to use different names and email addresses for different kinds of sites; and so on. At each step, the value of the data is corroded and the cost of collecting it increased.
So consumers are becoming at once more blasé about what they reveal about their habits and preferences, while at the same time more concerned about online privacy as a general issue. These two contradictory trends mean that there will be more and more data available to marketers that will be worth less and less. That new app may be collecting vast quantities of data about your movements and purchases, but – through either legislation or consumer suasion – the limits on its use will be sharper and narrower.
Now where does this leave the notion that users should be paid for the data they supply? The Regalado/Leber article suggests that Facebook owes us maybe $5 a year, while pointing out that valuation is fuzzy at this level when the real value exists only when the data is aggregated. Obviously, the less value your data has to a company the less they’ll be willing to pay for it, so if we expect the costs of collecting data and the constraints on its use to increase that $5 may be the high water mark.
Let us not suppose that individuals aren’t already being paid for their data. People participate in social networks because they receive value. Their opinions are shared with friends in a rewarding social intercourse, serving marketers incidentally. A wish list on Amazon has an immediate utility to the user, as well as value to Amazon’s researchers. In some cases the rewards are tangible, as when loyalty networks give coupons or discounts. I don’t know how the $5 figure was reached, so I can only assume it’s some kind of calculation of net income divided by the number of users, but I think it would be hard to argue that even a user who spends as little as ten minutes a month skimming their Facebook new feed isn’t receiving that much value in communication and entertainment.
The delicious irony in this debate is that it exposes a hypocrisy in the social network business model. Those companies who like to suggest they are creating value where none was found before are in fact stealing pennies from the masses. Like the rounding errors that some clever programmers diverted to their own accounts in the early days of banking system automation, social networks sweep up tiny bits of information which become valuable when gathered from a very large number of people. It works as long as nobody notices what they’re doing. Companies who have always characterized themselves as being on the cutting edge of the economy, those fearless entrepreneurial trailblazers – Ayn Rand would be so proud – in fact depend on the generous contributions of the collective; whereas the poor proletariat turn out to be the true entrepreneurs, calculating the business value that they provide and demanding to be paid.
Ultimately those consumers hoping to cash in are likely to be disappointed by the piddling value they can accrue; almost as disappointed as those entrepreneurs that thought social networks were an El Dorado where they could just pluck gold out of the stream. Consumers are going to become more demanding, legislation more restrictive and users more sophisticated. It’s going to be get harder and more expensive to extract and spend those nuggets.
