Your personal data has more use value than sale value. So what's the real market for it?
We all know that our data trails are being hoovered up by Web sites and third parties, mostly as grist for advertising mills that put cross hairs for “personalized” messages on our virtual backs. Since the mills do pay for a lot of that data, there is a market for it—just not for you and me. It's a B2B thing, Business to Business. We're in the C category: Consumers. But the fact that our data is being paid for, and that we are the first-source producers of that data, raises a question: can't we get in on this action?
In his RealTea blog (www.realtea.net), Gam Dias notes that this question has been asked for at least a decade, and he provides a chronology, which I'll compress here:
In 2002, Chris Downs, a designer and co-founder of Live|Work, auctioned 800 pages of personal information on eBay. Businessweek covered it in “Wanna See My Personal Data? Pay Up” (www.businessweek.com/technology/content/nov2002/tc20021121_8723.htm). (Chris' data sold for £150 to another designer rather than an advertiser.)
In 2003, John Deighton, a professor at Harvard Business School, published “Market Solutions to Privacy Problems?” (www.hbs.edu/research/facpubs/workingpapers/abstracts/0203/03-024.html). An HBS interview followed (hbswk.hbs.edu/item/3636.html). One pull-quote: “The solution is to create institutions that allow consumers to build and claim the value of their marketplace identities, and that give producers the incentive to respect them.”
In 2006, Dennis D. McDonald published “Should We Be Able to Buy and Sell Our Personal Financial and Medical Data?” (www.ddmcd.com/personal_data_ownership.html). “The idea is that you own your personal data and you alone have the right to make it public and to earn money from business transactions based on that data”, he wrote. Therefore, he continued, “You should even be able to auction off to the highest bidder your most intimate and personal details, if you so desire.” Also in 2006, Kablenet published “Sell Your Personal Data and Receive Tax Cuts” in The Register (www.theregister.co.uk/2006/10/04/data_sales_for_tax_cuts/print.html).
In 2007, somebody called “highlytargeted” auctioned off “non-personally identifiable information to help you better target ads to me”. According to Gam, “the package included the past 30 days' Internet search queries, past 90 days' Web surfing history, past 30 days' on-line and off-line purchase activity, Age, Gender, Ethnicity, Marital status and Geo location and the right to target one e-mail ad per day to me for 30 days.” Also in 2007, Iain Henderson, now of The Customer's Voice, published “Can I Own My Data?” (rightsideup.blogs.com/my_weblog/2007/10/can-i-own-my-da.html) on the Right Side Up blog. Wrote Iain, “...the point at which I will 'own' my personal data is the point at which I can actively manage it. If I have the choice over whether to sell it to someone, and can cover that sale with a standard commercial contract, then I clearly have title. But—and this is crucial—this doesn't mean that I 'own' all the personal data that relates to me. Lots of it will still be lying around in various supplier operational systems that I won't have access to (and probably don't want to—much of it is not worth me bothering about).”
In 2011, Julia Angwin and Emily Steel published “Web's Hot New Commodity: Privacy” (online.wsj.com/article/SB10001424052748703529004576160764037920274.html) in The Wall Street Journal, as part of that paper's “What They Know” series, which began on July 31, 2010—a landmark event I heralded in “The Data Bubble” (blogs.law.harvard.edu/doc/2010/07/31/the-data-bubble) and “The Data Bubble II” (blogs.law.harvard.edu/doc/2010/10/31/the-data-bubble-ii). Joel Stein also published “Data Mining: How Companies Now Know Everything About You” (www.time.com/time/magazine/article/0,9171,2058205,00.html), in Time.
The most influential work on the subject in 2011 was “Personal Data: The Emergence of a New Asset Class” (www.time.com/time/magazine/article/0,9171,2058205,00.html), a (.pdf) paper published by the World Economic Forum. While the paper focused broadly on economic opportunities, the word “asset” in its title suggested fungibility, which loaned weight to dozens of other pieces, all making roughly the same case: that personal data is a sellable asset, and, therefore, the sources of that data should be able to get paid for it.
For example, in “A Stock Exchange for Your Personal Data” (www.technologyreview.com/computing/40330/?p1=MstRcnt), on May 1 of this year, Jessica Leber of MIT's Technology Review visited a research paper titled “A Market for Unbiased Private Data: Paying Individuals According to Their Privacy Attitudes” (www.hpl.hp.com/research/scl/papers/datamarket/datamarket.pdf), written by Christina Aperjis and Bernardo A. Huberman, of HP Labs' Social Computing Group. Jessica said the paper proposed “something akin to a New York Stock Exchange for personal data. A trusted market operator could take a small cut of each transaction and help arrive at a realistic price for a sale.” She went on to explain:
On this proposed market, a person who highly values her privacy might choose an option to sell her shopping patterns for $10, but at a big risk of not finding a buyer. Alternately, she might sell the same data for a guaranteed payment of 50 cents. Or she might opt out and keep her privacy entirely.
You won't find any kind of opportunity like this today. But with Internet companies making billions of dollars selling our information, fresh ideas and business models that promise users control over their privacy are gaining momentum. Startups like Personal and Singly are working on these challenges already. The World Economic Forum recently called an individual's data an emerging “asset class”.
Naturally, HP Labs is filing for a patent on the model.
In “How A Private Data Market Could Ruin Facebook” (www.hpl.hp.com/research/scl/papers/datamarket/datamarket.pdf), also in Technology Review, MTK wrote, “The issue that concerns many Facebook users is this. The company is set [to] profit from selling user data, but the users whose data is being traded do not get paid at all. That seems unfair.” After sourcing Jessica Leber's earlier piece, MTK added, “Setting up a market for private data won't be easy”, and gave several reasons, ending with this:
Another problem is that the idea fails if a significant fraction of individuals choose to opt out altogether because the samples will then be biased towards those willing to sell their data. Huberman and Aperjis say this can be prevented by offering a high enough base price. Perhaps.
Such a market has an obvious downside for companies like Facebook which exploit individuals' private data for profit. If they have to share their profit with the owners of the data, there is less for themselves. And since Facebook will struggle to achieve the kind of profits per user it needs to justify its valuation, there is clearly trouble afoot.
Of course, Facebook may decide on an obvious way out of this conundrum—to not pay individuals for their data. But that creates an interesting gap in the market for a social network that does pay a fair share to its users (perhaps using a different model [than] Huberman and Aperjis').
Is it possible that such a company could take a significant fraction of the market? You betcha! Either way, Facebook loses out—it's only a question of when.
All of these arguments are made inside an assumption: that the value of personal data is best measured in money.
Sound familiar?
To me this is partying like it's 1999. That was when Eric S. Raymond published The Magic Cauldron (www.catb.org/~esr/writings/homesteading/magic-cauldron), in which he visited “the mixed economic context in which most open-source developers actually operate”. In the chapter “The Manufacturing Delusion” (www.catb.org/~esr/writings/homesteading/magic-cauldron), he begins:
We need to begin by noticing that computer programs, like all other kinds of tools or capital goods, have two distinct kinds of economic value. They have use value and sale value.
The use value of a program is its economic value as a tool, a productivity multiplier. The sale value of a program is its value as a salable commodity. (In professional economist-speak, sale value is value as a final good, and use value is value as an intermediate good.)
When most people try to reason about software-production economics, they tend to assume a “factory model”....
That's where we are with all this talk about selling personal data.
Even if there really is a market there, there isn't an industry, as there is with software. Hey, Eric might be right when he says, a few paragraphs later, “the software industry is largely a service industry operating under the persistent but unfounded delusion that it is a manufacturing industry.” But that delusion is still a many-dozen $billion market.
My point is that we're forgetting the lessons that free software and open source have been teaching from the start: that we shouldn't let sale value obscure our view of use value—especially when the latter has far more actual leverage.
Think about the sum of personal data on all your computer drives, plus whatever you have on paper and in other media, including your own head. Think about what that data is worth to you—not for sale, but for use in your own life. Now think about the data trails you leave on the Web. What percentage of your life is that? And why sell it if all you get back is better guesswork from advertisers, and offers of discounts and other enticements from merchants?
Sale value is easy to imagine, and to project on everything. But it rests on a foundation of use value that is much larger and far more important. Here in the Linux world that fact is obvious. But in the world outside it's not. Does that mean we need to keep playing whack-a-mole with the manufacturing delusion? I think there's use value in it, or I wouldn't be doing it now. Still, I gotta wonder.