Wednesday 23 February 2011

Is your privacy worth 100$?

Suppose you come across some nice guy on the street that makes you the following offer:

Hey, man, you really look like a nice person. Can you give me your list of friends, tell me where you are during the day, tell me what your opinions are in related to topics of my choice and generally tell me what/when/if you like or not things I ask about? I’ll get this information from you during your entire life, and perhaps I may want to share it with a few selected partners. You’ll have no control of who I partner with and which pieces of information I will share.

Being usually one kind of interrogative person, you’ll naturally ask back, of course, how much will you pay me?

This is basically what consumer panels have done for years. An old tool in the market analytics since a lot of time, consumer panels have been used by marketers to try to understand how people behave, react and interpret things. The biggest problem with consumer panels, besides costs, is I think what is called the "documentary effect": people usually act differently than they say. This term comes from media panels, because you're more likely to say that you watched an interesting film about quantum mechanics than admit that you were engaged with the latest "Got Talent" edition.

Now, put down in a piece of paper what you consider a sensible amount to charge for this information. Do it before you read the rest of the post.

Then suppose you came across some nice guy on the street that makes you the following offer:

Listen, I have an irresistible proposal for you: see, I will give you the ability to stay in touch with your friends, send them mail messages and chat with them about your holidays, show them your photographs and allow them to write comments about them.

Being usually one kind of interrogative person, you cannot resist and ask: how much all this will cost me?

Now, put down in another piece of paper what you consider a sensible amount to pay for this. Forget for a moment the plethora of services that provide this for free and force yourself to write a number.

Then take the first and second papers and put one besides the other. Now take the first paper and write below your number: 100 USD.

I'm not sure if the number is fair or not. Perhaps it's not too much, after all. That’s what this information is worth for Facebook(*). If I was explicitly asked to sell my personal information, I'd consider 100 dollars a very low price.

I haven't seen any Facebook business plans, but I think it's not crazy to assume Facebook business model revolving around giving a way for marketers to advertise with scalpel-like precision. The cost difference between what a consumer panel, with all its lack of precision costs, and the maximum 100 USD Facebook per user value is a dream come true for the marketer, especially since you're avoiding documentary effects.

And for Facebook, after operational and capital expenses, the difference is their profit.

And what's wrong with this? After all, Google is giving away excellent services for free in exchange for the privilege of being able to snoop your data. On paper, Facebook just moves this idea a bit further.

My only concern with all this is, what do you get in exchange for all those profits FB will collect? The ability to send messages and upload photos? Give me any day a Facebook like where I could, with a one off payment of 100 USD, do exactly the same that can be done with Facebook.

I'd pay them. Assuming of course that I was interested in using FB-like services. Which I'm not. But that's another story.

(TL;DR and advice for prospective clients: no, I have not a FB page, profile or anything like that. Nor I feel the urge to do so. And I'm sure that FB owner is a nice guy bad and this post was not meant to insult people that enjoy FB)

(*) Estimation based on 50 billion USD valuation divided by the estimated 500 million active users.