PGP co-founder: Ad companies are the biggest privacy problem today, not governments

The ad-blocker dispute is "going to be a lot of fun to watch," said Jon Callas.
Written by Zack Whittaker, Contributor
PGP co-founder Jon Callas. (Image: SkyDogCon via Twitter)

NEW YORK -- Ask one of the foremost cryptographers of the modern generation what the biggest privacy issue is today and you might expect something like backdoored encryption or government spying.

Jon Callas, co-founder of encryption software PGP ("Pretty Good Privacy"), who has worked at Apple, Entrust, and now Silent Circle, a security software maker and Blackphone maker, is well equipped to discuss the "state of the security union" today. Speaking last week, a day ahead of Data Privacy Day where he gave a Reddit "Ask Me Anything" talk, like many members of the security community, he was refreshingly blunt.

"I don't think we're doomed," Callas told me in a phone call last Wednesday. Reassuring as it was to hear that, he did warn of a brewing brouhaha on the horizon, one that doesn't involve government spying, hackers taking down websites, or data breaches that pilfer your private information.

"The adblocker dispute is going to become one of the fundamental battles on privacy," said Callas. "It's going to be a lot of fun to watch."

Think about the biggest tech companies going today: Apple, Facebook, Google, and Microsoft. These tech titans have more data on you than anyone or anything else out there -- even governments. (Why do you think they are served a near constant stream of warrants for user data?) In most cases, you serve up your data voluntarily, from emails to text messages, photos and documents, and social networking data.

But there's a growing divide between Silicon Valley companies about what they do with your data.

Advertising keeps most websites and services, like Google and Facebook, free to use. They can be annoying and intrusive, but they can also track which sites you visit across the internet and search terms you enter. Ad networks collect information about you -- browsing habits, search results, and other demographic data (such as your age, location, and education) -- which they argue helps them serve better ads. Callas explained that the users of these ad-driven services aren't the customer, but are the product -- in that they supply the data that drives the ad business.

"You are not giving up your information, you're basically selling it," he said. "We now know that the main privacy issue is with the ad companies, not with the government," said Callas.

In the wake of the Edward Snowden disclosures, every tech company is pushing for greater security, better privacy, and more transparency. But increasingly, tech companies are becoming polarized.

You have Alphabet (which owns Google and YouTube) and Facebook making about 89 percent and about 95 percent of revenue respectively. Yet, compare that to companies that don't really need your data to make money, but aim to put privacy at the top of their customers' agenda. Microsoft's ad revenue is a fraction of its overall quarterly revenue compared to its behemothic cloud and enterprise units. Apple makes the vast majority of its money from mobile device and desktop sales.

"The adblocker dispute runs right into this," said Callas. Everyone is trying to get on the privacy bandwagon; companies that don't sell on your data are the most prepared if the ad industry takes a downturn.

"The irony is that we have this line where you have Apple and Microsoft on one side, and then you have Google and Facebook," said Callas. "We're caught between these two groups of companies through our buying habits and reading habits and other things affect what they're doing."

Apple and Microsoft store data in-house to make their products better, and isn't sold onto third-parties. The financial downside is that you have to buy into their products and services, often up front, in order to enjoy the privacy that they provide. Apple, for example, provides perhaps the world's biggest end-to-end encrypted messaging service that has riled governments for shutting them out, but an entry level compatible device will still set you back a few hundred dollars.

It's the price you pay for privacy.

The bizarre dichotomy is that companies like Google and Facebook, which collect, store, and sell your data to make money, are "desperately" edging away from these models with other business interests, Callas said. As the ad-blocker dispute rolls on, these businesses will suffer decreased revenues, and face having to deviate and transform their business models away from ads.

And the ad-blocker dispute isn't going away any time soon. Many find ads to be intrusive, so they install third-party browser plugins to prevent them from showing. Others are more privacy minded, and want to prevent being tracked across the internet.

Just last week, Randall Rothenberg, a chief executive of a non-profit trade group which represents advertising companies, accused ad-blocking companies of being "self-proclaimed libertarians whose liberty involves denying freedom to everyone else" and "an old-fashioned extortion racket."

Rothenberg said publishers were set to lose close to $22 billion in 2015 because of ad-blocking, a jump of 41 percent. Companies like Facebook and Google face the prospect of adapting their business models, or suffering massive revenue losses.

"The ad people are absolutely right in that their business models aren't going to work when there are no advertisements," said Callas.

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