Exploring the economics of online identity
Skip to: [part 1] [part 2] [part 3] [part 4]
In part 1 of this series I propose that the open market in personal data will work ultimately in the interests of advertisers and those buying personal information - not the general public whose data is being used - unless members of the public exert pressure by shunning intrusive data services and selecting private alternatives.
In part 2 I look at some of the reasons regulation in this area may fail to protect consumers whilst risking a negative impact on innovation.
If personal data is the new currency as suggested by European Commissioner Reding , the consumer market is a classic confusopoly: a competitive market that is unable to function in the interests of consumers due to confused pricing. ‘Buyers’ are unable to choose the ‘cheapest’ alternative and, as a direct consequence, ‘profiteering’ goes unchecked.
With enforcement hampered by the ubiquity and massively distributed nature of data, not to mention the trans-jurisdictional element, many companies are holding on to more and more information about us.
So I'm saying the market if left unchecked will fail to protect consumers, and that may lead to a collapse in trust which will impact innovation. As will regulation. We're doomed, right?
Restoring control to the user
Not quite. One of the identified barriers to consumer choice is confusion, and our proposal for a standardised set of personal data licenses will help to break the confusopoly and temper the personal data land-grab.
Some data corporations today may not see it this way, but it really is in everyone’s interests to restore control to the user, and I'm pleasantly surprised by a number of global tech companies who do understand this.
Showing posts with label Identonomics series. Show all posts
Showing posts with label Identonomics series. Show all posts
Tuesday, 13 March 2012
Tuesday, 28 February 2012
Identonomics part 2: Law and enforcement, conflict and confusion
Exploring the economics of online identity
Skip to: [part 1] [part 2] [part 3] [part 4]
Previously...
In part 1 I explored the concept of personal data as a currency. Personal data has assumed more importance to the online advertising industry in particular than mere audience; data capture has somehow become an essential component in online advertising.
Yet this isn't a fundamental law of the market. There is still value to advertisers in raw audience; after all we still have billboards on the M4.
Online, the market is currently working in the interests of those paying for personal data or data dependent products like advertising; the few handing over cold hard cash.
It's basic economics: the only group making purchasing decisions are advertisers and those who buy personal data, therefore a competitive market will act ultimately in the interests of advertisers, driving up quality of product and driving down price.
But quality of product if today's trend continues will require gathering and sharing even more sensitive data about us, the users of online services.
If the market is to work instead in the interests of the public, the public must start to make their own purchasing decisions. They must chose to use or avoid services based on how their personal data is used and protected.
In many respects personal data is a currency. It might not be the only currency, we can still choose to pay in pounds or dollars, and in many cases simple participation may be sufficient.
We can build a market which acts in the interests of the end user, but only if users regain control and start to make informed decisions about the currency they hand over.
Law and enforcement, conflict and confusion
Today the public are not in control. They are conflicted and confused.
This is described by some sociologists as cognitive polyphasia: we want privacy but we want the benefits of sharing. We choose to use privacy-invasive services because they bring rewards, despite privacy worries. And less invasive alternatives seem slow to emerge.
And they're confused by the mechanics of data sharing: what is being shared, with whom, for what purposes; the length of time data is to be retained and who can see or access the data.
So can and should the law play a role in protecting consumers?
Skip to: [part 1] [part 2] [part 3] [part 4]
Previously...
In part 1 I explored the concept of personal data as a currency. Personal data has assumed more importance to the online advertising industry in particular than mere audience; data capture has somehow become an essential component in online advertising.
Yet this isn't a fundamental law of the market. There is still value to advertisers in raw audience; after all we still have billboards on the M4.
Online, the market is currently working in the interests of those paying for personal data or data dependent products like advertising; the few handing over cold hard cash.
It's basic economics: the only group making purchasing decisions are advertisers and those who buy personal data, therefore a competitive market will act ultimately in the interests of advertisers, driving up quality of product and driving down price.
But quality of product if today's trend continues will require gathering and sharing even more sensitive data about us, the users of online services.
If the market is to work instead in the interests of the public, the public must start to make their own purchasing decisions. They must chose to use or avoid services based on how their personal data is used and protected.
In many respects personal data is a currency. It might not be the only currency, we can still choose to pay in pounds or dollars, and in many cases simple participation may be sufficient.
We can build a market which acts in the interests of the end user, but only if users regain control and start to make informed decisions about the currency they hand over.
Law and enforcement, conflict and confusion
Today the public are not in control. They are conflicted and confused.
This is described by some sociologists as cognitive polyphasia: we want privacy but we want the benefits of sharing. We choose to use privacy-invasive services because they bring rewards, despite privacy worries. And less invasive alternatives seem slow to emerge.
And they're confused by the mechanics of data sharing: what is being shared, with whom, for what purposes; the length of time data is to be retained and who can see or access the data.
So can and should the law play a role in protecting consumers?
Thursday, 2 February 2012
Identonomics - the economics of online identity, part 1: personal data is the currency
Skip to: [part 2] [part 3]
Facebook's IPO reveals the value of online audience today. Each registered user is worth on average $4.38 per year in revenue, or $1.18 in profit. The business is hugely profitable, making $1bn profit from $3.7bn revenue.
483m people use Facebook every day, and we know from previous data released that Facebook gets around 100 billion hits a day. Together these stats give a very rough idea of the very low revenue per page impression and per daily unique user it receives. Around 2 cents revenue per active user per day; or, about a dollar from every 10,000 hits.
It's worth noting that not one cent of this income comes from Facebook's core users. Its services are free at the point of access.
But its users are paying in one way or another. EU Commissioner Viviane Reding said in a speech last Wednesday (25th January, video here):
But on the other hand she's spot on, as our "spending decisions" when choosing how to use free online services must be based on how much we are prepared to reveal about ourselves.
Personal data must start to be seen as a currency - if there is to be any hope of market forces conspiring in the public interest rather than the interest of advertisers.
Facebook's IPO reveals the value of online audience today. Each registered user is worth on average $4.38 per year in revenue, or $1.18 in profit. The business is hugely profitable, making $1bn profit from $3.7bn revenue.
483m people use Facebook every day, and we know from previous data released that Facebook gets around 100 billion hits a day. Together these stats give a very rough idea of the very low revenue per page impression and per daily unique user it receives. Around 2 cents revenue per active user per day; or, about a dollar from every 10,000 hits.
It's worth noting that not one cent of this income comes from Facebook's core users. Its services are free at the point of access.
But its users are paying in one way or another. EU Commissioner Viviane Reding said in a speech last Wednesday (25th January, video here):
“Personal data is the currency of today’s digital market”On one hand, Reding is wrong; for ad-funded services free at the point of access, the value is in the audience and participation is the currency.
But on the other hand she's spot on, as our "spending decisions" when choosing how to use free online services must be based on how much we are prepared to reveal about ourselves.
Personal data must start to be seen as a currency - if there is to be any hope of market forces conspiring in the public interest rather than the interest of advertisers.
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