“When something online is free, you’re not the customer, you’re the product.”
Nobody seems to know who said this first; but it’s become a fundamental truth of modern life. For Facebook and other free sites, you and your personal data are essentially all that they have to sell, enabling them to offer the targeted advertising that brings in the cash. According to a Harvard Business School and Columbia University study (pdf), US ad buyers spent more than $5bn on social media ads last year, and online marketing as a whole is now a $62bn business in the US.
The range of data being collected is staggering. When you post a photo on Facebook, for example, the company knows where and when the picture was taken. It knows which web pages you visit, which TV you watch online and, often, how you’ve reacted to ads on other sites.
In the US, where privacy standards are lower, far more information is routinely collected and sold – everything from deductions about religion and ethnicity to, incredibly, medical data such as having been a victim of rape. Data brokers then combine and analyse this information to create and sell groups of profiles. And these aren’t always used as you might expect: “Biker Enthusiasts”, for example, might be sold not only to motorcycle retailers but also to insurers looking for patterns of risky behaviour.
According to the US Federal Communications Commission (pdf), data broker Datalogix, which works with Facebook, has personal information for nearly every household in America. Rival firm Acxiom, meanwhile, has around 3,000 “data segments” on virtually every consumer in the country.
Interestingly, however, people seem to value their own data comparatively little. Last year, researchers at Spanish telecoms firm Telefonica and Italy’s University of Trento kitted 60 people out (pdf) with smartphones that recorded their movements through the day, along with the phone calls they made and the applications they used. Once a week, the participants took part in an auction to sell the data – and the team found that they valued it at just a couple of dollars.
But are we being naive? The amount of information we’re giving away is increasing all the time, making your value to advertisers ever greater. And should you be getting a share of all this money? Some people think so.
A new social network, Bubblews, pays its users a fraction of a cent every time one of their posts is read or liked. Each post has to be at least 400 characters long: the aim is to get users to give away as much personal information as possible to attract advertisers.
“We… believe that people should be compensated for this type of information that they share on social networks, and the audience they are able to attract because of it,” says the company.
Another organisation, TheGoodData, has been set up as a for-profit cooperative. It allows people to donate their data, which it anonymises and sells; the proceeds are then lent to microcredit projects in developing countries.
And a more direct market for personal data is now starting to emerge. US start-up Datacoup offers people $8 per month for their personal and financial data, with the user choosing which categories of information they share, from their social media activity to their current account. The data is anonymised and then sold on to brokers and advertisers.
We can’t, though, deduce much from this $8 figure – the company is in its early days, and the number is rather plucked from the air, says founder and CEO Matt Hogan. “In the long run, it will most definitely change when a robust, two-sided market exists,” he says. “By that point you’ll be choosing between cash, products, offers, subscriptions and other forms of compensation for your data.”
We are, of course, already trading our personal data directly – every time we use a supermarket loyalty card and receive a discount coupon, for example. But most of us have very little idea of exactly what’s being collected by the websites we visit, and no real knowledge of how that data’s used.
The Telefonica researchers believe there should be an open, free market for personal data: “A ‘stock market’ model of trading, in which data contributors, data brokers and data consumers would be part of an automated value chain,” says Jose Luis Agundez Dominguez of the company’s big data innovation team.
“This is an opportunity that I see as being realised not too far in the future. It may very well be that the different elements of this data trading economy already exist in the present. Perhaps they’re just too scattered for us to see it yet.”
This piece forms part of our Social Media Week. Click here to read the introduction, and here to see the other pieces in the series.
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