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User data flowing from one internet company to the next have become a commodity that trades for cash — they are the currency of the information economy. Much of these data are personal information provided by consumers in exchange for free online services. Every time you search on a browser, share on social media, or purchase from an e-commerce company, data are collected, tracked, and aggregated for sale to third parties. These third parties are often advertising or marketing firms that resell the data to commercial clients looking to reach a certain demographic. Advertisers and marketers want to collect as much information as possible — the more detailed and unique their data, the better they can target ads (and higher its value). But the growth of the consumer data market has led to consumer concerns about privacy and questions about whether government has a role to play.
The continued uptick in smartphone use has been a boon to the data industry. The majority of smartphone transactions take place in apps with terms-of-use agreements that grant the companies permission to use and resell user-generated data. Websites play a key role in the data collection business as well — known, functioning email addresses are pure gold in the consumer data market. A recent report by a Princeton researcher found that web trackers collect email addresses through the autofill function (that fills in your email and password) in browsers such as Chrome, Firefox, and Safari. User emails are collected and sold “hashed” or encrypted in a fashion that allows marketers to track cross-device activity. This allows marketers to follow consumers’ activities as they move between computers and smartphones.
At the same time, consumer concerns about how their data are used have grown. A November survey by Recon Analytics gauged American consumers’ understanding of how their personal data are collected and used by social media companies. Among the findings: 73 percent were “concerned about how their personal data is being collected and used by internet companies.” Almost 77 percent wanted “more transparency on the ads being targeted to them based on the personal data the internet companies collect.” And 29 percent of survey respondents didn’t even know that “many of the ‘free’ online services they use are paid for via targeted advertising made possible by the tracking and collecting of their personal data.” As a result, 77 percent of survey respondents supported regulations that would require transparent rules for data collection, and 82 percent were in favor of “legally requiring internet companies to disclose what information is being collected and to whom they sell it to.” To many consumers, the lack of transparency regarding how personal data are collected and used means the “free internet” model is starting to feel not so free.
Moving forward, it would be smart for the internet titans and their colleagues with data-aggregating businesses to voluntarily move toward adopting transparency rules that are the same for anyone collecting data. There are tools offered by many of the companies that collect data to limit collection of consumers’ information, but they can be challenging to navigate to the point of achieving anonymity. Simplicity would give consumers a better understanding of how to control their part of the data collection practice.
Agreements on transparency around data collection and data marketing practices may mean more restrictions on how data companies manage their products, but it certainly beats the alternative of being under heavy-handed European-styled regulation, like the upcoming General Data Protection Regulation (GDPR), which includes expensive fines and extremely specific collection guidance that would narrow internet companies’ business models significantly.
The internet owes much of its success to the US government’s “hands-off” approach that has allowed digital communications and commerce to flourish. For the exchange of data to continue flowing and the internet economy to continue thriving, consumer concerns have to be taken seriously. The Wild, Wild, West of the internet pioneer days are coming to an end, and there is bound to be a sheriff in town. Consumers should know how they can choose to avoid collection of their data if that is their concern. The Federal Trade Commission (FTC) recently held a workshop on informational injury where Acting Chairman Maureen Ohlhausen noted consumers want to be able to evaluate the trade-offs for sharing their data and knowing how they are used, collected, and stored. If the FTC is the most likely sheriff of the data frontier, they are telling the data miners to make their collection practices more orderly, understandable, and consumer friendly now, or face regulation on the horizon.
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