Today’s consumers have access to a wealth of free tools and resources. From email to social media, some of the most important parts of our day-to-day lives are happening on platforms that have never once requested our credit card information. The reason? In exchange for offering us free services, companies like Google, Facebook and Twitter are monetizing our data. They’re carving out marketing channels for brands to reach us with targeted advertising messaging, and they’re re-packaging our account activity into datasets.
There’s nothing intrinsically wrong with this model — two-way exchanges of value are mutually beneficial. As a recent Internet Retailer article points out, Facebook is seeing strong results from its advertising product, and costs-per-acquisition (CPA) are on the rise on the platform as a result. For instance, desktop purchase rates grew 233 percent among men and 182 percent among women between the 2014 and 2015 holiday season. In other words: ads are working because consumers are responding to and finding value in them. Data collection, here, is a win-win.
At the same time, these data collection and advertising models are illuminating a greater need for transparency in the tech space. Consumers need to be aware of what is collected and shared, to ensure checks and balances and better exchange of value with data collectors. What happens to our data? Who actually has access to it? What do these individuals want to know about us and why?
In November, Data Transparency Lab (DTL) held its first conference to discuss these issues and more. With the goal of making data transparency a reality for individuals and led by Mozilla, Telefonica, Open Data Institute and MIT, the DTL initiative shines a light on practices involving people’s online personal data.
Our devices have been black boxes, this is something that has frustrated me for years. – David Choffnes, professor of computer science at Northeastern University and DTL partner
At a minimum, consumers should pay attention to the following when using online services.
The company’s monetization model
If all services were truly free, business’s couldn’t exist.
When consumers use a free product, there’s an exchange of value somewhere. Google, for instance, offers email and productivity tools free of charge but collects user data and monetizes through ads. Facebook offers a free social network to consumers but generates revenue through online ads. In some way, shape, or form, consumers end up paying by sharing their data.
As mentioned above, sometimes data leads to a win-win, but in the sake of complete transparency, consumers must be aware of how much their info is being valued. DTL-backed tools such as ReCon and FDTV track leaky apps and alert you when you’re info has been transmitted.
ReCon was specifically built to leverage transparency against leaked data. A study by Harvard University found that 73 percent of the 55 most popular Android apps shared personal information with third-party websites without notifying customers. Some app makers transmitted this information across networks in plain text, making them an easy target for hackers. Tools like ReCon and FDTV let consumers know who’s leaking their data and where it’s going.
Sometimes, it’s not always possible to see how a company is handling user data. It’s not because of anything nefarious, either – some startups are still figuring out their revenue pictures. At the same time, some degree is transparency is critical: if asked, a company should be able to disclose how user data fits into an actual or potential monetization plan.
“Transparency is an the best first step to prevent misuse in everything,” says Dane Atkinson, CEO of SumAll.com. “Sadly that’s not the case right now and most big companies have enough data to do a match with a data management platform to develop a complete profile on a user. They don’t disclose doing that kind of mapping and many sell their data back out to that ecosystem.”
The most trustworthy companies are the ones that disclose their intents about user data. It’s important to know what’s happening in the background – especially when there are apps involved.
Value placed on user experience
There are consequences that happen when companies focus on data and data alone. The biggest? Customer experiences begin to suffer due to slow page load times and awkward user experiences. According to Alessandro de Zanche, head of audience and advertising systems for News UK, many companies in the digital advertising industry are struggling with these challenges.
As he mentioned in a recent talk, “the perceived benefits of ad block are better user experience, faster page loading, and improved privacy.” More so than the ads themselves, consumers are frustrated with the media experiences that advertisers and brands are creating when they prioritize their own messages.
“We need to re-establish the dialogue with the user,” explains a recap of de Zanche’s talk.
Companies can’t sacrifice user experiences in exchange for targeting and data collection experiences. Consumers will just get frustrated.
Take Uber, as an example. The company updates its surge pricing every five minutes, but in April 2015, this behavior changed: users were getting random surge multipliers throughout the day. Researchers discovered a consistency bug that gave people incorrect prices. This issue went on for six months, until Uber was able to find a resolution. As part of the solution, Uber launched a transparency blog, to provide more insight on pricing decisions to customers.
As a consumer, it’s important to pay attention to the companies that have come to this realization – these will be the products and services that offer a true win-win in offering adequate data protection and mutual value. The less trustworthy companies? They are the companies that are strongarming consumers for more than they should reasonably give.
Potential tradeoffs for using other options
Some products and services may seem better than others at face-value, but what’s happening on the backend? It’s important to keep this perspective in mind when evaluating a free option’s value proposition.
“Freemium services are increasingly popular, but they depend on alternative monetization strategies, which might include data mining, selling user data, or advertising,” says Scott Petry, CEO of security startup, Authentic8. “Paid subscriptions ensure that the users are the primary customers, not advertisers or unknown 3rd parties.”
But more and more companies are experimenting with both models simultaneously, meaning that freemium companies are offering paid options, and paid services are also monetizing data similar to how a free service would.
Consumers should expect to see companies falling on a spectrum. The situation may not be one or the other.
“Industry associations such as the Open Web Application Security Project (OWASP) provide resources for both consumers and providers on best practices,” says Petry. “What providers should do, and what should consumers expect from their providers.”
When it comes to monetization, opportunities with data are still experimental. Companies are testing new waters all the time, and laws are running to keep up.
Consumers should not take their privacy for granted: each individual is his or her own best decision-maker and we should all have the ability to understand how our data is used. When seeking out service, whether free or paid, look for companies that prioritize data transparency. Also, keep up-to-date with the online personal data transparency debate.