• The Unique Economics of Personal Privacy

    August 17, 2011 • Privacy • 2 Comments

    “Personal data is the new oil of the internet and the new currency of the digital world.”

    Meglena Kuneva (European Consumer Commissioner) Roundtable on Online Data Collection, Targeting and Profiling, Brussels, 31 March 2009

    Personal Privacy, as it relates to internet commerce and social sites, has become a gating factor to increasing internet participation. Responding to privacy lobbying, a recent Senate bill (Kerry McCain 2011) provides “robust opt-out” provisions for users who do not want their personal data harvested and used without their knowledge or agreement. In Europe, personal privacy is aggressively guarded in provisions of the European Union Agreement. As a result, existing US privacy “protections”, skewed in favor of existing data businesses, have created a scenario where participation and commerce across geographic boundaries is being curtailed. This problem threatens US economic growth. Opt-out would provide an all-or-nothing light switch, delivering a one size fits none solution.

    Online advertising was a $26B business in 2010, yet it has two inherent weaknesses that limit its continued growth. First, growth is highly correlated to macroeconomic performance. Second, the value of the data that provides precise targeting has a very short shelf-life. Massive volumes of personal data have been gathered and sold on a short term basis but stored on a long term basis. The unfortunate by-product is databases stuffed with “exhaust” data, monetized by 3rd party sales, resulting in applications that are ineffective while also being detrimental to the privacy and intent of the consumer.

    Similarly, Customer Relationship Management, or CRM, application software and programs was a $30B business in 2010. In these systems, customer perceptions and interactions are captured, codified, analyzed, and ferreted away. Yet corporate officers resoundingly indicate via surveys (Gartner, Forester, others) and forums that they are disappointed with the return on their investment. Nonetheless, companies continue to pour money into CRM improvements in hopes of establishing a stronger relationship with their customers, improving satisfaction and gaining a better understanding of product requirements, as well as market dynamics and trends.

    Finally, online commerce was an $180B business in 2010. While the migration of commerce to the web has been little impacted by global macroeconomic performance, legitimacy, trust and use of data remain gating issues to the continued migration of consumers to lower cost web-based e-commerce solutions.

    The challenge – and the opportunity – is aggregating and delivering personal data in a manner that does not expose or disenfranchise the individual, supports valuable services (email, contextual ads), provides relevant shopping experiences and supports stronger consumer-to-business relationships through increased market intelligence, all while at the same time preserving the privacy and integrity of personal data.


    2 Responses to The Unique Economics of Personal Privacy

    1. Pingback: Data Not Just The New Oil, Also The New Battleground | Loyalty Truth Blog

    2. Pingback: Data Not Just The New Oil, Also The New Battleground | LoyaltyTruth

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