New York Times reporter Joshua Brustein provides a great introduction to the model that Personal and companies like us are developing in “Start-ups Aim to Help Users Put a Price on Their Data.” However, a central question remains unresolved: what is the true economic value of personal data?
No one knows the answer – yet – because no fair market exists for individual data. The question raises the possibility that, if it’s not very much, people are unlikely to care enough to change their behavior. We believe there are a host of non-economic reasons that people will want to proactively manage their data (time savings, greater privacy, less friction, making better, faster decisions, etc.), but the question of determining economic value is critical.
The current model is built for companies, not people
Some look for clues to the average annual revenue per user for Google and Facebook. These “free” services, whose advertising revenue is based largely on personal data, earn $24 and $4 respectively per person every year. But is $28 enough to motivate people to change their behavior and do a lot of work? Maybe not. But it is the wrong question. Properly used, we believe companies like Personal will be able to prove your data, when tied to a single purchase, can create 10-20x the value that Google or Facebook can over a year.
The current paradigm is entirely dysfunctional and inefficient from the perspective of the individual. For example, the Direct Marketing Association says over 97% of online advertising fails to reach the right person at the right time. The pennies from the 3% success rate may add up for companies exploiting data across millions of people, but it requires a number of unsustainable practices, such as the increasingly invasive and sometimes unethical tracking of people. It also requires that they co-opt your attention and time and resell that along with your data to others trying to reach you.
The emerging user-centric marketplace
What might a user-centric marketplace look like and how much economic value can a person realize in a year?
First, you need a marketplace that respects the sanctity of one’s data, time (time is money, after all), privacy and identity (anonymity is the default). The technologies, business rules, and legal and privacy protections must be created nearly from scratch to protect the individual. (Our CTO, Tarik Kurspahic, will present at SXSW on building a privacy-by-design platform).
Second, the marketplace would focus on commercially relevant data such as your brand, travel or clothing preferences, along with data about your intent to buy something (also known as purchase intent). These two types of data alone can fundamentally change data economics when combined with a controlled marketplace to reach you when and how you want to be reached.
This last point is key. We do not support the idea of people “selling” personal data. Rather, we believe such data can be used in a safe environment to connect people with companies with highly relevant products, services and even content and information. Doc Searls and others have referred to this idea as Vendor Relationship Management (VRM). Companies that play by these new rules will have the most direct and positive channel ever created to reach people, including their existing customers.
People can realize thousands of dollars per year
Finally, we believe companies that earn your business (and those who don’t) will be willing to compensate individuals for having the chance to interact with qualified buyers of their particular good or service. This far more efficient marketplace can easily add up to thousands of dollars annually as people realize the full benefit of their data, time and purchases. That should move the needle for just about anyone.
We appreciate the serious attention being focused on this emerging space by the New York Times, as well as The Wall Street Journal, The Economist, AdAge, AdWeek, Forrester Research, MIT Tech Review, The Washington Post, TechCrunch, Mashable, the Harvard Business Review and others. It is an idea that will ignite untold innovation and benefits for each of us.