Privacy Isn’t a Right. It’s a Commodity.

What's to come?
Nov. 7 2013 7:51 AM

Privacy Isn’t a Right

It’s a commodity. Here’s how to profit from it.

online privacy.
Click "agree," lose your privacy.

Photo by Siri Stafford/Digital Vision/Thinkstock

This essay was adapted from Reputation Economics, by Josh Klein, published by Palgrave Macmillan.

Privacy isn't your right anymore. We sold it for pictures of cats and the ability to tell anyone in the free world what we had for breakfast.

I'm not saying it was a bad trade, either. The Internet as we know it came about through the monetization of metadata—information about us—instead of by replicating traditional models of content sales. As a result the Internet exploded into a plethora of useful services and platforms of every shape, size, and description. What's more, it was a great leveler—nobody had more valuable personal information than anybody else, so everyone was able to trade it in for the same kinds of services.

The problem with all this is that "privacy" as a notion was abdicated the instant you clicked "agree" to the online services agreement you didn't read. And yet most consumers haven't yet realized that their date has left the restaurant and they're stuck with the bill.

Part of the reason for that is that Big Data has finally begun to produce some very real, tractable, monetizable techniques. As an example, see a couple of patents Microsoft filed several years ago. Roughly described, the first one allows the company to put a number on any identity's ability to influence others around a particular word or topic. So for the word cheese, you might have a high score of 88 because you run a popular cheese blog, whereas I might be lactose intolerant and only have a score of 17. The second patent is more interesting: It allows Microsoft to dynamically price a good or service based on your score.

This means that if you go online to buy some cheese, Microsoft can ask Kraft if it wants to give you a big discount in the hopes that you'll say something nice about its cheese and thus drive up sales. Conversely, if I go to buy some cheese, it can ask Kraft if it wants to jack up the price to the point where I'm unlikely to buy it, to save the embarrassment of a potentially bad review. Is that wrong? Is it a violation of privacy? Materially, it no longer matters. We clicked "agree" and now they legally can—and by doing so make a whole lot more money.

This emphasis on our data and its uses as a marketing tool has grown so fast and so far that competitors to the traditional credit card companies are now starting to drive down their collective margins by consistently underbidding one another. Square (a company whose dongle plugs into your phone and lets you accept credit card payments), Simple (an online-only bank), and others are happy to charge less of a percentage of each transaction because they know they'll be able to make up the lost profit through resale of the metadata they've collected—the "who bought what from whom, where, and when." It's not by accident that they emphasize the use of mobile phones (which have built-in GPS) for facilitating their transactions and Web browsers (which connect to all your other online identities) for managing related funds.

At least these "insights" are happening in a restricted online space, you might think. After all, I can certainly choose not to spend my time looking at ads on Facebook. But you'd be mistaken. Many stores use infrared cameras to determine what products you look at and for how long before you buy. Cell service providers have started reselling information about what data you access on your phone at which physical location. For example, Telefonica, one of Europe's largest cellphone providers, recently released a product called Smart Steps that would tell retailers who entered their stores and when, allowing them to tailor products, promotions, and staffing.

On the face of it, a lot of this can, as with online advertising, be chalked up to companies simply wanting to be better able to give us what we want. After all, most people don't complain about getting useful search results from Google or helpful product suggestions from Amazon. But it may not be in our best interest to be sold as much as we can buy at the highest price we can afford.

131106_FUT_ReputationEconomics

Courtesy Palgrave Macmillan

That leaves us with limited options. We've already decided that privacy is not a right—and we affirm that every day that we use Facebook and Google and all the other services for which we've clicked “agree.” We can opt out entirely, which is increasingly only possible if we want to wrap our heads in tin foil and live in a cave. Or we can throw up our hands and take what we're given, which is the most popular choice.

But a better option might be to simply raise our prices. We can limit how our personal information is gathered and utilized, and in doing so we can demand that it be purchased at higher rates than just access to Instagram. It may not mean cold hard cash (at least not at first), but we can certainly expect more premium services, more discreet advertising, or even just better control over who gets our data and for what purposes.

After all, once we start controlling what we share with whom, we can decide that certain kinds of information are worth more to which retailers. Want to know what sort of food I regularly order? I might decide to share that with FreshDirect (a grocery delivery service) and Seamless (a restaurant delivery service), but not with Good Eggs or GrubHub (their competitors). Once those services recognize that I've got a commodity they want—namely data that allows them to upsell, cross-market, and target-promote—and that I'm willing to withhold that information from one provider in favor of another, it changes the game substantially. In exchange for my precious data, companies might offer me meaningful dollar-value promotions, discounts, and special offers.

And if companies won’t start offering genuine value for your data, then you should consider holding it back. Most of the tracking systems that exist online can still be circumvented or blocked: There are virtual private networks (VPNs) to prevent our location from being tracked, browser plug-ins to keep our Web page views private, encryption tools to keep our documents and emails from being scanned, and anonymizing software to allow us to participate in social networks without our real-world identities being connected to our online conversations. As an added bonus, many of these technologies (such as TOR for anonymizing our Internet traffic or PGP for encrypting our email) can also protect our data from government surveillance, both national and international.

Attending to these options is a hassle. They're not designed to give you a convenient, seamless user experience. But as the value of our personal information begins to rise, it puts us in a position to name a price for it. By making such choices we're insisting that our personal information be valued at what we think is a more accurate market price than "almost nothing."

From Reputation Economics by Josh Klein. Copyright © 2013 by the author and reprinted by permission of Palgrave Macmillan, a division of Macmillan Publishers Ltd.

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