Why Facebook (and everyone else) should sell your data.

In today’s age of free apps and an open web, many of the products essential to the daily life of a connected citizen are supported by advertisements.   The meaning of an ad supported website has changed a lot over the past 10 years.  In 2000, most websites would throw 3-4 popup ads and a banner ad at each customer, hoping to get a click by accident, frustration, or luck.  Today, most ad supported websites and apps will instead show a single, targeted ad.   This improvement was facilitated by the aggregation of user data that allows advertisers to target customers by demographic.

When signing up for any free service today, it is par for the course to click “Accept” on a 10+ page EULA or TOS that gives the company the right to collect and/or distribute your personal data.   Most people are fine with simple data collection, but the sale of personal data from one company to another makes many uncomfortable or angry.   However, one must look at the information market from a more rational perspective in order to understand why any web service with your data would be wise to sell it as fast as possible.

The market for personal information is different than the market for any physical good.   The first difference is the supply/demand dynamic.   There are billions of connected people on earth, each with 100s of valuable data points, yet there are probably only a few thousand buyers (ad agencies, researchers, etc.).   This means that your average internet user has little leverage in this situation, if he/she refuses to provide data in exchange for a service there is almost definitely someone else who will.   The second difference is the nature of information itself.  When you sell your car, you must hand over the car, the keys, and everything else associated with it.  No two people can own and drive the car at the same time.   When you sell your email address, however, you simply hand over a copy of the data which was entirely free for you to produce.  You can sell your information, but obviously you still keep it as well and you are free to sell it to another buyer at any time without notifying any previous buyer.   And while there can be infinite copies of any single personal data point, it is only the first copy recieved that has any value.  An ad agency might pay $x for your email address the first time around, but they certainly won’t pay any more for two copies.   This further inflates the supply/demand ration discussed before.  With every “sale” you make by signing up for some web service, you are creating a new copy of your information.   Imagine how many services you have signed up for, and how many ways someone on the internet could find your email address or a phone number.  It is only the first person to find a buyer for your information that will profit, and the rest are now holding something which they paid for (in money or time) that is essentially in the public record.

As you can see by the very simple points outlined above, in the current system any rational, profit-maximizing company would sell your data as quickly as it can without losing you as a customer.  Of course, this is not really an acceptable solution to monetizing the web in the long term.  As the release of private data causes more and more trouble for individuals around the world, companies can expect to see some resistance to the current model.  So, what is the solution?  That’s a key question, and not one that I can claim to answer.  I have put some thought into some possible solutions that may arise, and I will list them below.

1.  A True “Transactional” Information Exchange System

I’ll say this right off the bat: this solution is the most ridiculous and the least probable, but still interesting to think about.  What if selling your phone number to an advertiser was just like selling your bike?  Once you sold it to one person, you couldn’t sell it to anyone else (they could, but then they’d lose it as well).  What if you could sell ad advertiser the “licensing rights” to your email address.  Given the exclusivity of the deal, surely it would be worth a lot more to that buyer.  Of course, you’d still own and operate the email address you would just lose the right to give it to any service that might use it for marketing.  I’m not sure what effect this would have on the web, or if this would even be possible, but it’s an interesting situation to think about.

2.  A Personal Copyright System

This is a revised version of the system above.  What if you could agree on the value of holding your information for x number of days.   You could then pay a website by “licensing” your profile for an agreed duration.  This would have to be centralized in some way, likely through a government “official” online profile.   This would be highly regulated by the law and companies found to be using your information after the agreed term had ended would face legal consequences. This system would be very hard to enforce but also very interesting because it would require a person to think about the value exchange in using what we now call a “free website”.

3.  The Web Moves to Paid

It may be in the near future that people will no longer play along with the massive information transfer and sale that is currently occurring on the internet.  However, the services loved by so many will still be in demand and still have costs.  The natural progression is for websites to move to a paid model in exchange for an ultimate guarantee of privacy.  No ads, no information sale, just a simple exchange of currency for product like any physical good.   In the coming years we will see if people value their privacy enough to pay for services we have come to expect to be free online.

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