Is Online Privacy Worth Paying For?
CREDIT: Rafal Olechowski
Imagine firing up your computer and navigating to Google. When the home page loads, there's a "click to pay" option. Then at the end of the month, you see a bunch of charges on your credit card statement for Facebook, Twitter and Yahoo!, just as you do for iTunes.
Instead, we have a free-with-advertising model for most Web services, but that has its own costs.
In light of changes to Google's privacy policies, social-media tracking site Klout's profiles of people who never joined, and constant complaints about Facebook, consumers are getting concerned about how much information online services gather about them. And now government is taking action. This week, the Federal Trade Commission, among other actions, signaled that technology and advertising companies should either develop their own do-not-track options for consumers, or it would call on Congress to enact laws mandating it.
Certainly there is a need to set boundaries. But data gathering will not go away, because it's essential to advertising, and advertising is essential to free services.
The alternative, of course, would be for consumers to pay, and few people would. If Google survived at all, it wouldn't have the plethora of free features such as navigation, photo sharing and email. Facebook wouldn't have nearly a billion users, and Twitter would wither.
"It wouldn't work the same way," said Thomas Forte, Internet analyst at Telsey Advisory Group. "Google and Facebook are highly dependent on ads." As Facebook recently revealed in its filing for an initial public stock offering, advertising (generally targeted advertising) is where just about all its money comes from. Google took in $37.9 billion in revenue in 2011, and $36.5 billion was from ads. To replace that income, Google would, for example, have to charge Gmail users about $9 a month. "I don't think a high number will pay a monthly tab," Forte said. Instead they live by advertising, and data collection is an inherent part of online ads.
“Do not collect is basically death for online advertising,” the New York Times quoted an anonymous "official from a prominent technology company" in an article from Monday (March 26) about the new Federal Trade Commission recommendations. If so, what option is there other than to charge?
Without targeted ads, Internet companies might look more like HBO. One of the big selling points of the channel is the lack of ads — that and high-quality programming. Enough subscribers value HBO that it gets the money to keep producing those shows. But it's a rare company in an industry where cable subscribers are complaining about rates and increasingly talking about "cutting the cord" in favor of getting cheaper (or free) video online. Because free is the default on the Internet.
"I find it doubtful that Google or others would have become such pervasive services unless they were for-fee from the start, especially if free alternatives were available," said Robert Zakon, CEO of the Zakon Group consultancy and compiler of the Internet Timeline, an online history of the Internet.
What kind of tracking will we accept?
Networking site LinkedIn offers a clue. People go to the site precisely because they want to be targeted — by business connections. The fact that people pay money for the premium accounts, essentially opting in, means that a typical LinkedIn user feels that paying with their data is worth the payoff.
Perhaps more Web services can gain user trust by making clear what data they collect, and what's in it for the people who give it up.
Image via Shutterstock / Rafal Olechowski