Much of the value that social media companies possess is based on its users' data, and how that information is monetized. However, while making money from such data is critical for a sustainable business, service providers need to put consumers' trust above other considerations.
Andrew Milroy, vice president of Asia-Pacific ICT practice at Frost & Sullivan, said the growing ubiquity of social networks and how people use these services daily has redefined the social paradigm of people's privacy. Some users become more guarded about personal information posted online, while others increasingly accept that the price they have to pay for using these social networks for free is to give up some of their privacy to third-party companies, he said.
This was seen in two incidents last December involving Foursquare and Instagram. Foursquare had announced that users' full names would be displayed at all check-ins come January 28 this year, while venue owners will get to see more of visitors' recent check-ins, instead of just three hours' worth.
Milroy said that the difference in user reactions had little to do with the way both companies disseminated their respective policy changes. Rather, Instagram's proposed changes elicited more unhappiness because people are generally more sensitive about their photos than check-in data. They also do not gain anything from any deal involving their content, whereas check-in data can be used to push promotions or deals to consumers, he noted.
Social network users that ZDNet Asia spoke to had similar sentiments. Jane Wong, a media executive, said: "It's human nature. I'm open to share some aspects of my privacy if I know there's some benefit for me and it's a benefit that I want--like exclusive, big discounts because I'm a regular [customer]. The trade-off isn't much."
Thomas Goh, a public sector executive, added that he would "kick up a fuss" if a social media company crossed the line of maintaining his privacy for commercial reasons.
"But if it's just a small sacrifice, and the company does it somewhat sincerely, then I would be more open to letting it use the information it requires," Goh said.
Trust over all else
Roger Yuen, founder and CEO of Clozette, a Singapore-based fashion social network and e-commerce site, said that data monetization is an important revenue stream for many social media network operators, but that companies should not encroach on user privacy to make money.
"The most important tip [for social platforms] is: 'Don't break the trust of the community.' We believe the ethical aspect of data monetization is more important than the legal parameters. In the world of social media networks, trust is one of the key considerations for users to join and remain on the network," Yuen stated.
He said that data monetization and user privacy need not be mutually exclusive. Instead, it is about understanding what the user community wants and matching these to monetization opportunities.
"At Clozette, if we can connect users who are bag or shoe fanatics to interesting offers and updates from brands they love, these users would be ecstatic. Then we have lots of monetization opportunities where all parties can co-exist happily," the CEO said.
The company uses permission-based e-mail marketing such as shopping newsletters to achieve the kind of balance he described. Such marketing efforts are based on the philosophy that users opt in for these services because they are "convinced" that the content and offers they receive are relevant and beneficial for them, Yuen explained.
Singapore-based photo-sharing service provider Burpple pointed out that data collection might not even have to include monetization activities.
"We believe that the primary function for data collection is for internal analysis to better understand our product and improve users' experience on it, and not for monetization purposes," said Elisha Ong, co-founder of Burpple.
Policies need to be transparent
To foster better trust among consumers, Milroy advised social media companies to be transparent and educate their users on their business models so that they can make an informed choice when signing up. For instance, a company can demonstrate the relationship between its services and the privacy implications in simple English, which is free of legal and technical jargon, he suggested.
Michael Chui, principal at McKinsey Global Institute, the research arm of McKinsey & Company, added that in straddling monetization needs and user privacy, social network operators must respect the privacy regulations in the jurisdiction in which they operate in.
It must understand and manage both the explicit and implicit agreements it has, not just with users, but other stakeholders as well, including regulators, policy makers, and business partners, Chui said.