"Data-Driven Thinking" is written by members of the media community and contains fresh ideas on the digital revolution in media.
Today’s column is written by Nishat Mehta, executive vice president of global partnerships at dunnhumby.
Thousands of years ago, economies were built on bartering. It was an inefficient system that required both parties to offer a good or service valuable to one other, assuming they valued everything similarly. For example, I gave you a bag of grain in exchange for medical care that you provided me. If grain was more valuable to me than to you, you may demand more grain than I feel I should pay, creating friction and, therefore, inefficiency in the transaction.
Money was invented to provide an objective unit of measure to enable the free trading of goods and services. Money is now exclusively used in modern economies because it provides transparency, fairness and efficiency.
Today, we see the growth of a new asset class: data. Yet its limitations resemble a barter system. Facebook, for example, trades a service connecting you to your friends while Google trades a powerful search engine and mobile operating system in exchange for your expressed profile data. Unfortunately, these barters lead consumers to believe they are not fairly compensated for their data, while publishers and marketers remain confused about what permission they actually have to use this data. This system is not ideal for anyone.
Imagine a world where data and services that are currently free had a price tag. You could choose to use Google or Facebook freely if you allowed them to monetize your expressed data through third-party advertisers, subject to fair, reasonable rules and regulations, such as an agreement that they could not sell email addresses to spammers. Alternatively, you could choose to pay a fair price for these services, but use of the data would be forbidden or limited to internal purposes.
An Efficient Model
Whichever choice you make, this model creates several efficiencies. It would offer transparency because customers could put a price on their data and determine if that price is worth the benefits. And just as consumers maintain control over where they spend their money, they also will have control over where they choose to monetize their data, which would allow them to end relationships with organization that misuse their data.
The model would also provide clarity of use and ownership. When someone pays for a good, we inherently understand that the new owner can use it for purposes outlined in the transaction. If a publisher wants to pay someone for a consumer’s data, they will define what they want to do with it (email marketing, online retargeting, addressable TV, selling anonymized access to an advertiser, etc.). If the consumer decides this transaction makes sense for her, both parties reach an understanding and are comfortable with what use is considered acceptable.
Finally, the model would make personal data more meaningful. As consumers create and own even more data from health and fitness wearables, connected devices and offline social interactions, market dynamics would set the fair price that would compel customers to share that data. The data is more accurate, and therefore valuable, because it is expressed, rather than inferred, unable to be collected any other way and comes with clear permission from the user for its use.
As with everything in media, this model’s biggest hurdle is achieving the audience scale necessary to be interesting to advertisers. However, a financial market for data does not require us to start over, as we can leverage existing services and infrastructure. If Facebook simply offered and broadly marketed a monthly payment plan for use of its social network in exchange for limited or no data collection of users, those most concerned about their data would pay up because it meets their needs. Everyone who continues to use the free version would begin to understand how their data is valued and could decide if the “discount” they receive from Facebook is worth the responsible use of their data. Users would also retain control because they could change their minds and decide to pay Facebook in exchange for not sharing their data.
To be clear, paying for the responsible use of personal, expressed data is not new. For years, market research firms and retailers have used consumer panels and loyalty cards to money or discounts for customer data.
We also see the same concept in other industries. Apple and Google released health data frameworks that consolidate information from numerous apps into one data store. Customers control how the data is shared and app developers aren’t allowed access unless it benefits the customer. But this is still less than ideal because a customer is likely prevented from being paid to contribute her data to a nearby hospital’s research study, and therefore does not have total choice over use of her data. This model will evolve, enabling customers to sell their data to anyone for a price they feel is fair.
Apple has also opened a conversation on data privacy around health data by attacking Google and Facebook’s business model, where the customer is the “product.” Facebook and Google have responded accordingly. This conversation – between three of the largest consumer technology companies in the world – raises awareness among customers and regulators, which will result in greater transparency over the value exchange between customers’ data and services provided to them.
New commercial models have also arisen experimenting with exchanging money for data. DataCoup enables users to share various data via links to social networks, credit cards and other accounts, and then pays a portion of any money generated from the syndication of the anonymized data. Tsu has started a social network that pays users directly for their content. Two researchers at MIT are also working on an Internet protocol called HTTPA – HTTP plus accountability – that would let consumers see an audit trail of how their data was used and by whom. Contributor by Google and other “freemium” products allow users to choose to pay a publisher instead of seeing ads on a website. With Google in the mix, it seems clear that experimentation with alternative funding models for the Internet is becoming necessary, as customers demand more clarity over how their data is used.
Giving Consumers Control
In 10 years, we will look back at customer data use today the way a doctor would look at a patient who tries to pay for a blood test with a (giant) bag of grain. We will live in a world where each consumer creates at least a thousand times as much data as they do today. Customers will offer that data to advertisers in exchange for some transparent monetary value. Consumers will be able to access a real-time account statement on their iPhone 11S showing exactly how that data was used and what monetary value they got in exchange for it, and turn off certain uses they no longer feel are fair to them.
As both a consumer and a marketer, that future looks bright.