How confused are our notions of user data? Well, let's look at how much it might be worth. There are several different ways we could try to ascertain the fair value of your data.
For buyers, user data is dirt cheap. User profiles -- slices of our digital selves -- are sold in large chunks, i .e. at least 10,000 in a batch. On the high end, they go for $0.005 per profile, according to advertising-industry sources.
But maybe that's not the right way to value the data. After all, each profile of you being sold only takes advantage of some subset of your information. Facebook and Google make roughly $5 and $20 per user, respectively. Without your data in one form or another, their advertising would be mostly worthless, so perhaps your data is worth something in that range.
But let's not forget the rest of the Internet advertising ecosystem either, which the Internet Advertising Bureau says supported $300 billion in economic activity last year. That's more than $1,200 per Internet user and much of the online advertising industry's success is predicated on the use of this kind of targeting data.
If you're keeping score, this necessarily apples-to-oranges comparison yields a difference of 240,000 times between how much a user profile sells for and how much a user, herself, may be worth to the ecosystem. That's six orders of magnitude worth of confusion.
But the problems go even deeper than that. In a survey by Carnegie Mellon's Lorrie Cranor and Stanford's Aleecia McDonald, only 11 percent of Americans would be willing to pay $1 per month to withhold their data from their favorite news site. However, 69 percent of Americans were not willing to accept a $1 discount on their Internet bills in exchange for allowing their data to be tracked. That is to say: if people think data is already flowing to a website, few would pay to hold it back. But if they think their data is being held back, a large majority would be unwilling to share it.
What this means, as Cranor and McDonald put it, is that "people who think they have already lost the ability to control private information ... may value privacy less." If, post-facto, you inform people that you're already using their data, they won't pay to stop you. But if you ask beforehand, they might. So, the companies making the data-tracking tools have serious incentive to erode the idea of privacy not just because they can make (more) money, but because privacy erosion leads to more privacy erosion. The system is self-reinforcing. This is a problem.
One intriguing solution -- in part because it doesn't require politicians or regulators to actually take on businesses -- comes courtesy of a Washington startup, Personal. They want users to entrust their data to Personal and then mete it out to advertisers in exchange for discounts. Your data paired with your purchase intent could yield massive efficiency for advertisers, some of which would be passed on to you in the form of discounts. Personal's CEO Shane Green thinks that his model might mean that user's information ends up being worth far more than the $1,200 estimate we came up with.
"If you do the math on a family vacation to the Caribbean, the low end of the economic value you can realize is 5-15% on the overall dollars you're spending on that purchase," Green told me. "On a $10,000 trip, that can really add up."
If this model catches on, it could generate positive privacy externalities. If users started to use Personal, or something like it, they might start to want control of their personal data not for vague privacy reasons or because of "creepy" ads, but because they realize that it has real economic value. Instead of exchanging massive amounts of cheap data in exchange for free Internet services, they could capture some of the value that lies in between $0.005 and $1,200 (or more).