The data black hole that could suck the life out of the internet economy

The data black hole that could suck the life out of the internet economy

Summary: Data is the fuel of the internet economy – but what if it starts to run out? Inivisible web users and a data privacy black hole could cause web giants to rethink how they deal with customers, according to research.

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Data privacy: the black hole that could torpedo online retail? Image: Shutterstock.

Data is the fuel that powers the internet economy: whether consumers realise it or not, in order to use pretty much any website or online service, they hand over some form of data, which is then re-used or resold.

It's an exchange that is so common that it's even spawned a catchphrase: if you're not paying for a product, you are the product.

The internet economy is based on the assumption that this data will be freely available and plentiful forever. But what if that's wrong — what if we've already passed 'peak data' and, thanks to increased awareness of the value of their data, consumers are becoming reluctant to share what, until now, they've given away for free?

The internet's reliance on an unending stream of free data could be unwise, according to analysts Ovum. It has conducted a survey in which 68 percent of the respondents across 11 countries would select an online "do not track" feature if it was easily available.

This hardening of consumer attitudes towards sharing data, coupled with tightening regulation, could diminish personal data supply lines and have a considerable impact on targeted advertising, CRM, big data analytics, and other digital industries — opening up a data black hole underneath the internet economy.

Mark Little, principal analyst at Ovum, said a series of data privacy scandals have fuelled consumers' concerns over the protection of their personal data.

The Ovum survey found that only 14 percent of respondents believe that internet companies are honest about their use of consumers' personal data.

Little said many consumers are unaware of the bargain they are striking when they use websites or services. "The privacy policy and the terms and conditions of a website are a very unilateral take-it-or-leave-it contract that most people don't read and if they did, wouldn't understand anyway. In legal terms they have given us the deal and we have accepted it because a lot of sites say 'if you use this site, you have accepted the contract that you haven't read'.

"A lot of people intuitively understand that there is a quid pro quo in trading our data for the services but that's not everyone and also the deal has not been explicitly laid down in front of us."

What if we've already passed 'peak data' and consumers are becoming reluctant to share what, until now, they've given away for free?

Currently consumers have no way of understanding whether they are getting a good deal or not, Little said. "You are giving them an amorphous unknown amount of personal data, the impact of which you have no understanding. There are no privacy metrics in the system and so no consumer can value whether it's worth using, say, Google's search for the amount of data they are giving away."

It becomes even more complicated because the data harvested online can be combined with other third-party data sources that can make the consumer profile richer and more comprehensive, he said: "There is an escalation of knowledge about you after you've made that initial deal."

But as privacy awareness rises, consumers are willing to share less. "The more internet users learn about what's going on the more they're tempted to block," Little said. Indeed, privacy is already being used as a competitive differentiator — Microsoft launched a marketing campaign 'Scroogled' aimed at luring away users from Google's Gmail service because it scans email to deliver targeted ads.

Little acknowledges there is a disconnect: while people will tell researchers they are willing to enable do not track, not all will actually do so. Nonetheless, "even if half of them acted on that, it would be quite a disruption to the supply of data", he said.

Fall in data quality?

Legislation such as the European E-Privacy Directive (which regulates how websites can use cookies), the do not track feature in browsers (which prevents websites from tracking browsing), as well as a nascent market for privacy products and services, will also limit the amount of data that can be harvested.

"If more and more of those cookies are blocked, that will cut down the quality of the dataset that they receive and potentially create gaps and weaknesses of correlation. On the big data side if you start taking out significant chunks of people who 'go dark', then the correlations will become less valid," Little said.

"This situation could lead to a shaking of the internet economy as we see it at the moment. This is not going to happen suddenly — it's going to rise like flooding water."

But he added: "There is a way out of this: the internet economy isn't going to be destroyed by this because it's a very flexible and entrepreneurial organism and it will evolve as it needs to maintain its supply lines."

Little said that companies need to rethink their attitudes and engage with consumers rather than seeing them as a product that can be mined for data on an industrial scale.

Companies should also plan for disruption to their data supply lines, said Ovum, and invest in tools that help them understand the profile of today's negatively minded users who could become "tomorrow's invisible consumers".

Technologies such as personal data vaults — used by consumers to decide how much personal data they are willing to share — could put data-sharing decisions in the hands of consumers, not the big internet players. 

Topics: Big Data, E-Commerce, Privacy

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9 comments
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  • Talk about

    This week, developer Ginger updated its Chrome plug-in, Grammar and Spell Checker. When the update was pushed, I couldn't believe its intrusiveness: The plug-in would need full access to my entire computer. To its credit, Google disabled it by default.
    paul613
  • I agree, PII is easy to fix

    Steve,

    I agree with you, the solution is indeed in "Technologies such as personal data vaults ". "Personal" devices can help even further because they remove the need to associate "SmallData" with an identity. Mobile platform can mediate the sharing of private information without needing to make it identifiable.

    I describe different data sharing scenarios and protocols here.

    This kind of architecture is extremely disruptive to the Web architecture, but to be honest, I am not sure it would take "the life out of the internet economy". It would certainly hurt badly intermediaries like Google Adsense (but obviously they would simply transfer that revenue to Android by charging a fee to mediate the sharing of non identifiable PI). Merchants would still get the information they need (probably even more and more accurately) to give you the deals you want. In general Merchants don't care about you, they care about these parameters that feed their algorithms. Unfortunately, the architecture of the Web has pushed this practice in the realm of privacy.

    We should advocate for a ban on capturing, selling or sharing PII. The technology is here. We all would be much better off, even the merchants would welcome it, I think.

    Jean-Jacques Dubray
    jdubray
    • missing link

      There are a couple of links that didn't make it to my reply, here they are:
      http://bit.ly/11uHEL7
      http://wh.gov/VwQK
      jdubray
  • Advertisers brought it on themselves......

    They have simply become too intrusive into every aspect of life. They want to know where my location on many websites, they want to know what I looked for on other sites, etc.

    Just send advertisements based on the page I am currently on, is that so hard to ask?
    cmwade1977
  • if you're not paying for a product, you are the product Is the problem

    When I was born in the 1960's the idea was using advertising to capture a wide demographic to make a ware of product or generate a desire for the product.

    I see today "internet economy" as lazy advertising. Not data gathering is intrusive but very annoying and often inaccurate . For example just because I go to build -a-bear once to look at the latest bears, does not mean I am interested in buying one at this time. Now all my ads on other sites sites are Build-A-Bear and missing other opportunities of good I may need right now like paper and cheap ink cartridges.
    Richardbz
    • Help for you printer cost

      Get a laser and say good buy to high ink-jet cost.
      Altotus
  • That's one economy I wouldn't mind watching disappear.

    "Data is the fuel that powers the internet economy: whether consumers realise it or not, in order to use pretty much any website or online service, they hand over some form of data, which is then re-used or resold."

    That's one economy I wouldn't mind watching disappear. I never believed that resale of data was a good way to run things to begin with.

    "It's an exchange that is so common that it's even spawned a catchphrase: if you're not paying for a product, you are the product."

    Bingo. And it's true. And frankly, I'd like to go back to paying for my products, thanks.

    "The internet's reliance on an unending stream of free data could be unwise, according to analysts Ovum."

    I agree.

    "The Ovum survey found that only 14 percent of respondents believe that internet companies are honest about their use of consumers' personal data."

    I'm not surprised, considering these companies never indicated they are honest, open, or transparent. They are very secretive and have been caught red handed many times engaging in practices that are clearly anti-consumer.

    In this case, I'd say the 86% are right.

    "The privacy policy and the terms and conditions of a website are a very unilateral take-it-or-leave-it contract that most people don't read and if they did, wouldn't understand anyway."

    And if they *did* understand, they'd likely go somewhere else. These companies count on the fact that people really don't understand these terms.

    "Little acknowledges there is a disconnect"

    YA THINK?!

    "Legislation such as the European E-Privacy Directive (which regulates how websites can use cookies), the do not track feature in browsers (which prevents websites from tracking browsing), as well as a nascent market for privacy products and services, will also limit the amount of data that can be harvested."

    Note to businesses: If the gov't is taking action, it's usually at the request of the people. The same people who buy your products. If you refuse to listen to your customers, they will bite back.

    "Little said that companies need to rethink their attitudes and engage with consumers rather than seeing them as a product that can be mined for data on an industrial scale."

    Totally agreed.

    "and invest in tools that help them understand the profile of today's negatively minded users who could become 'tomorrow's invisible consumers'."

    There is a name for those tools:

    COMMON SENSE.

    This should have never happened this way to begin with. It doesn't take special tools to know that people wouldn't like it.
    CobraA1
  • If you don't know if you're getting a good deal or not, you're not.

    I guarrantee you're getting ripped off.
    Dr_Zinj
  • Consumers aren't so stupid.

    We know that every online agreement is a nonsense, leaving us with no rights - that's why we don't bother to read them. We also know that privacy policies are broken on a daily basis.

    But we also know that trading a bit of personal info is the price for a 'free' service. The worst that can happen is more spam, and most email clients are pretty efficient at removing the stuff from inboxes(well, gmail sure is, so I'd be surprised if the others are far behind).

    What we are not doing (most of us!) is giving away bank passwords - so don't blame us if the banks choose to get ripped off by billions each year - and assist the thieves with easy money transfers to hidden accounts in poorly regulated countries. That isn't our fault - it's the banks.

    And if banks can't work the Internet, let them stop using it. Let others take their place.

    The solution isn't legislation - it's technology.
    Heenan73