Americans should value their data as much as tech companies do


Recently, multiple Congressional committees have held hearings to explore the role of technology companies in distributing extremist content and Russian disinformation online. Politicians from both sides of the aisle have expressed concern over the influence of “Big Tech” on American lives and elections. Senator Mark Warner (D-Va.) commented that Facebook, Google, and Twitter “have transformed the way we do everything from shopping for groceries to growing our small businesses. But Russia’s actions are further exposing the dark underbelly of the ecosystem (these companies) have created.”

{mosads}Similarly, Senator Lindsey Graham (R-S.C.) noted, “these technologies … can be used to undermine our democracy and put our nation at risk.” While the hearings have focused on what the federal government can do to reduce that risk, it’s just as important to consider how consumers can protect themselves — and why they don’t.

Only two years after its 1998 founding, Google processed just over 9 billion annual searches. Today, it handles about 3.5 billion daily searches and has processed over 1.5 trillion so far this year. Likewise, Facebook has grown into a global communications platform used by more than a quarter of the world’s population, surpassing 2 billion users earlier this year. Clearly, there is an appetite for these “freemium” services — but if consumers knew what they were giving away to use these platforms, they might demand more for the photos, likes, comments, or search histories that comprise their valuable consumer profiles.

Though distinct, the business models of these tech giants rely on the same underlying commodity: consumer data. Their financial reports reveal, unsurprisingly, that user data drives their profits. They sell consumer data for third-party research and advertising or use it in targeted product suggestions.

Just last month, Google’s parent company Alphabet announced a 33 percent profit gain, to $6.7 billion, based on growth in its advertising business. According to Facebook’s recent quarterly report, the average user in the U.S. and Canada brought in $19.38 of revenue from April through July. Annualized, that would mean nearly $80 in revenue per North American user, which enables Facebook to achieve astounding profit margins. Yet users do not seem to understand the value they bring to these enterprises and send mixed signals about privacy.

In a 2015 Pew Research study, nearly 93 percent of Americans viewed having control over who can see information about them as important. However, approximately 65 percent of Americans have a Facebook account that, through a license agreement, requires them to relinquish control over pictures, online comments, and personal preferences. In other words, they maintain “ownership” of their content, but not control of usage rights. The conflict is perplexing.

These “transactions” are voluntary and consumers are not required to use these services. However, the industry is not transparent about the value of user data and user-generated content, or the fact that users are the product. Public documents, obscure government reporting forms, or extensive Terms of Service agreements outlining the nature of the relationship between consumers and technology companies can shed some light on the financial value of user data, but not enough.

Contrast the models of Facebook and Google with traditional software licensing, where users typically pay a fee, either up-front or through a monthly subscription, for the use of software products and services. Google and Facebook provide software platforms for no charge, and their users supply moneymaking value through data and content creation. These tech giants could offer their services for payment in exchange for eliminating or reducing the amount of data they collect and retain, but Facebook and Google have a vested interest in keeping the true value of user data opaque: profit on user data and content.

Facebook and Google rely on consumer apathy toward service agreements and the value of user data. A more complete understanding of the business dynamics between themselves and data-driven technology companies may compel consumers to wield their market power more effectively. That may mean choosing alternatives that forgo data collection in exchange for a fee, or that pay consumers for access to their data.

No such alternative has succeeded yet, and it’s unlikely that any will while consumers undervalue their data. If a major hack exposed the private messages or search histories of millions of consumers, they may finally realize the value of their information and take an active interest in the stewardship of their data. Perhaps only then will Big Tech have sufficient economic incentive to adopt new business models.

Kyle Burgess is Executive Director of Consumers’ Research, the nation’s oldest consumer organization.

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