Private 'I'

What's the value of privacy in the digital age?

I recently spent a few hours on the Internet learning about myself. First, I purchased my profile from a company called Intelius (slogan: "Live in the know"), which provided my age and date of birth, my former employer, the names and ages of my immediate family members, and my past six previous addresses.

Then I bought a subscription to Spokeo, which revealed my phone number, ethnicity, occupation and level of education. Spokeo was a little less accurate than Intelius, identifying me as a high school graduate rather than the holder of an M.A. degree, but most of the information was correct. Finally, I ordered a criminal background check from InstantCheckMate and was relieved to discover that I had never been arrested, had no outstanding lawsuits against me, and wasn't a sex offender. Whew!

Companies such as Intelius and Spokeo gather that information wherever they can find it—court cases, marriage and divorce records, property deeds and sex offender registries. However, data collectors don't have to dig as hard as they used to. Thanks to social media sites—Facebook, Twitter, LinkedIn—people increasingly are voluntarily serving up details about the most intimate aspects of their lives: their kids' names, their pets' names, where they live, what they like to eat, their favorite sports teams, how they feel about anything from Jimmy Fallon taking over the Tonight Show to drone warfare, and everything in-between. A veritable feast of personal information, and yes, a marketer's dream.

Online data collection is big business … and getting exponentially bigger. Analyst firm Wikibon predicts the total market for data sets collected through website, social media and other means of digital communication to approach $50 billion by 2017. Whether it's an advertiser trying to learn your buying habits, an employer deciding whether to hire you, or somebody you just met wondering whether to date you, there's a thriving online market in personal information.

Mendoza College students are already being educated in the ways of collecting, analyzing and mining what has come to be called Big Data. In one assignment for the Business Forecasting and Data Mining course (taught by Finance Professor Barry Keating at both the undergraduate and MBA level), students are tasked with discovering which customers of a bank are prime prospects to take out a loan. Students are given about 25 categories of information on individual customers, including types of accounts the customers have, the size of their families and the ZIP codes where they live.

Using sophisticated data-mining software, students are able to identify characteristics that people who have borrowed in the past have in common. From this, they build a computerized model that—if they did it right—is 7½ times better at predicting who will become loan customers than by just guessing, which is essentially the method of broad-based advertising. That's going to save a lot in marketing costs.

Set against this trend, the traditional concept of privacy is fast becoming extinct. In many ways, this might be considered a "win" for business, but what's the tradeoff for consumers and society?

THE VALUE EXCHANGE

Howard Tullman presents a view of the online world where "privacy" seems like a quaint notion. Tullman, the founder and CEO of Tribeca Flashpoint Academy in Chicago, is not only a serial entrepreneur, but something of a guru when it comes to social media. He's worked with clients ranging from Tyra Banks to documentarian Ken Burns. His presentations, such as the one he recently delivered to the Notre Dame MBA class "Commercialization Analytics," are revelatory—slide after slide of statistics, charts and statements that provide vivid documentation of not only how pervasive a presence social media is in our lives, but how unaware we are of its power.

Stats like these:

Facebook now has 1 billion users—or 1 out of 6 people in the entire world population—and it can predict with greater than 80 percent accuracy which two people will change their status to dating each other.

Google users conduct 3 billion searches every day, and the search giant collects 57 different kinds of criteria on the person searching every time.

"You have no idea about how much we know about you, and it's only getting more so," says Tullman. "Personal data is the oil of the digital age. It's really what is going to drive everything."

That statement might sound like an Orwellian plotline, until you start to grasp the larger picture of how Tullman sees the evolution in social media. Where the Web once primarily was about providing information, it's now a social venue where we go to share personal information about ourselves and engage with others. Against this backdrop of information sharing, consumers increasingly are willing to volunteer personal information in return for a reward of some kind. Tullman calls this the "social value exchange."

"The estimates are that by 2020 more than 90 percent of the U.S. population will give up some portion of private information because of an incentive," he says.

As a result of this tradeoff, ads, search results and product suggestions are "hyper-personalized," says Tullman, which means they are targeted very specifically to your demographic, geographic and psychographic data. Anyone who has used a search engine to hunt for a product or service online has noticed how relevant the advertisements are that appear alongside the results. That's because advertisers pay Google and other search engines to place ads next to certain search terms like "laptop" or "college." Users of Google's email service, Gmail, are shown advertisements based on the messages they send and receive. Netflix and Amazon.com suggest products based on their past consumption patterns.

The advantage for marketers is obvious; Facebook—which recently partnered with Datalogix, a firm that records purchasing patterns of more than 100 million American households—found that 70 percent of advertisers with ads on Facebook got back three times as many dollars in purchases than they spend on ads, according to Slate.com.

But is this level of digital scrutiny and precision marketing good for consumers? Ultimately, yes, say many experts. "Smart" ads provide more useful information than the traditional carpet-bomb approach, which delivers up ads to consumers almost indiscriminately. The TV spots for feminine products, or those touting "best herbicides" in a market that's largely urban, fall into this category. Many social media marketers argue that not delivering targeted ads to consumers is a disservice. But even if hyper-personalization doesn't win you over, that scenario doesn't describe where the real benefits lie. There are revolutionary changes yet to come.

Devaraj says businesses should be required by law to notify consumers about how their information will be collected and what it will be used for, and that consumers should have the option to "opt out."

Hard-liners who want to safeguard their privacy online can always try to thwart the tracking devices. Some websites allow users to keep their data private, but they typically don't advertise the option, and many users remain unaware that they even have a choice. Internet browsers like Firefox and Internet Explorer allow users to reject the behavior-tracking cookies. But users who refuse to accept cookies lose access to many of the Internet's most popular sites like Google and Facebook.

Such defensive measures strike the typical younger consumer as extreme, says Carol Phillips, director of the market research firm Brand Amplitude and an adjunct instructor of marketing for Mendoza College. Phillips studies Millennials, the generation that came of age around the year 2000. She says that members of this cohort are not just comfortable with businesses—Facebook and even retailers—knowing their likes and dislikes, they've come to expect it.

"The thing about Millennials, especially Millennial women, is that they are always shopping," she says. "They'll take a break and switch over to see what's new at shopping websites. It's almost a hobby. And they expect it to be somewhat tailored to them."

As a result of such generational differences, if you ask what the value of privacy has become in the age of Big Data, one valid answer would be, "It depends on your age."

Here's another.

In his presentation to the Commercialization Analytics class, Tullman mentioned that Amazon.com's latest tablet computer, the Kindle Fire HD, comes in two versions. One displays ads personalized to the user when the device is on but the screen is locked. The other doesn't run ads on the so-called lock screen. The ad-free version costs $15 more.

Said Tullman: "We are starting to understand much more clearly that privacy is just another thing that's for sale."

WHEN ‘SEARCH' FINDS YOU

Search engines increasingly have the ability to track not just what you're searching for, but they also can recognize a multitude of factors beyond the text. This is called "contextual search" and includes such criteria as location and time. Google Now, available on Android for the last six months and just released for the iPhone/iPad platform, utilizes contextual search by accessing information in your calendar and Gmail accounts.

"You no longer have to search for content, content can search for you, which flips the world of search completely on its head," says Brian Proffitt, adjunct management professor who has authored 24 books on mobile technology and personal computing. Before computing was made mobile via smartphones, tablets and netbooks, searches were only aided by previous searches. But since mobile technology has added context to the searches, the results are more robust, which in turn increases the perceived value of the search engine.

Further, Proffitt sees the next evolution on the horizon, where contextual search strategically integrates with the "Internet of Things," a term used to describe an inter-connected network of devices large and small, reporting data on their current state. For example, your car might sense a malfunctioning part and schedule a service appointment, or your refrigerator might let you know you're low on milk. This also means that marketers will have even more opportunity to pitch to specific needs.

"If Keurig ever made its machine to be wired to the Internet, and knew how much coffee I drank every day, they would start sending me coupons like crazy," said Proffitt, who also is morning editor and daily contributor to ReadWrite.com, a widely read and respected tech blog.

A third link to the chain of contextual search and Internet of Things is artificial intelligence or software agents. Proffitt likens these agents to personal butlers, or sort of like Siri on steroids—a software app that reviews and organizes your schedule, reminds you of what you need to take with you, checks your travel routes and adjusts as necessary, and so on.

Imagine you're a repairman with multiple service calls to make in different parts of town. "Here's what a software agent would do. You would log into your phone, and the agent would provide your schedule, offer up a map, tell you where the part you need is," says Proffitt. "On your way, the agent will autodial the contact and let him know that you are on the way, and ask if you can meet in the lobby. When you step out of your vehicle, every part you should have in your toolkit is noted, and if missing, the agent will remind you."

Proffitt sees these advancements in mobile tracking and response as having the potential to revolutionize the way we organize our lives, essentially eliminating large chunks of time lost to forgetting tools, missed appointments, waiting for someone to show up, and just being lost.

"This ‘butler' is the third part that is going to glue everything together in the future. You won't have to search for anything," he says.

THE DARK SIDE

It's hard to miss the analogy to 2001's HAL in the example above. And even techies like Proffitt understand there's a certain creepiness to having your every move tracked.

A lengthy article in the The New York Times last year explained how companies are able to learn people's secrets in the Information Age. One example involved the Guest Market Analytics team at the retail giant Target, where the retailers' marketing strategists were able to mine data from the stores' loyalty card program and identify shoppers who, judging by the items they bought, were pregnant. The thinking was that if the store knew which women were expecting it could target them with advertising and promotions in hopes of getting them to make all their maternity purchases at Target.

The model worked well, the paper reported, possibly too well. A year after the pregnancy predictor's creation, a man walked into a Target store outside Minneapolis and demanded to see the manager. In his hand he held a store mailer addressed, by name, to his high-school-age daughter. Inside were coupons and advertisements for maternity clothing and nursery furniture. The man wanted to know why Target seemed to be encouraging his daughter to become pregnant.

The father later discovered that his unwed teenage daughter was, indeed, expecting. She hadn't told him. But Target's algorithms had their suspicions.

Online retailers surreptitiously install "cookies" on users' computers during a visit to track user behavior and make purchase recommendations. But such snooping isn't always to consumers' advantage.

Last year the travel-booking website Orbitz admitted to showing different, sometimes costlier, choices to customers detected as using the Mac operating system than it showed to Windows users. That's because it had discovered that Mac users tend to stay at more expensive hotels, The Wall Street Journal reported. The company told the paper it was experimenting with the system and never showed the same room to different users at different prices.

The recent unveiling of Google Glass introduces a whole new level of scrutiny of private lives, with critics openly worrying that the slick new technology will turn us into a legion of "Little Brothers." Eight members of Congress drafted a letter to Google CEO Larry Page outlining their concerns for privacy infringement.

The glasses, which aren't yet for sale to the public, connect to the Internet and allow wearers to record videos, take photos, post to social media sites, text message and innumerable other functions. One of the main concerns is whether private individuals will have any ability to control whether their image is recorded, and where it's posted.

"As soon as people stopped geeking out on Google Glass, others started raising serious concerns," said Proffitt. "Cameras on phones are ubiquitous, to be sure, but Glass raises the level of surreptitious to the N^th degree."

Proffitt said that just by wandering into the field of view, non-Glass users may find themselves unknowing and unwilling participants in the video and photo drama of Glass users' digital journals. "Even the most benign use of Glass could gather information on nearby people—citizens who may not have signed any user agreement or privacy waiver with Google," he said. "And complicating this situation is that there is no easy way for non-Glass users to opt out of being recorded, as jamming technology is unworkable and illegal in some cases."

DO NOT TRACK?

Proffitt says tracking consumer behavior isn't new; for decades, loyalty programs have made it possible for marketers to collect product sales data in the aggregate. What's new is the amount of data collected and the level of detail. And businesses are starting to see a push-back, he says.

"One of two things is going to happen. Either we as a society are going to put our foot down and say no, and there will be some legislation," says Proffitt. A "do not track" act is already being considered by Congress, but it's getting serious resistance because it would basically blow up the targeted ad industry, he added, making online ads more like the less targeted ads we see on TV.

"Or over time," Proffitt continues, "there will be a slow education
process and people are going to accept this into their lives. They are going to have to recognize that if they want to use these services on the Internet, they are going to have to make some trade-offs."

It appears the public is ready to make this trade-off. At press time, even while the news was unfolding that the National Security Agency has been collecting domestic phone data for years, a Pew Research Center survey found that 56 percent of Americans said the tracking is an acceptable way for the government to investigate terrorism.

And for those who want to unplug and escape notice altogether? Not possible (short of moving to a cabin in the woods with a million dollars on hand so you can pay everything in cash), says Proffitt. The recent case of the Boston Marathon bombings, where the suspects were identified from the thousands upon thousands of images and video clips sent in by bystanders and local businesses, serves as a case in point. You don't have to be online to be tracked.

Most personal information figures to be gathered surreptitiously, "cookie" style. But Mendoza College research suggests businesses may be better off changing tactics.

Mendoza management faculty Sarv Devaraj, Daewon Sun and Constance Porter (now of Rice University) recently conducted a survey that assessed participants' willingness to provide personal information if they trusted the firm. The study suggests that the best way for businesses to collect confidential information may be to simply ask consumers for it after they have earned the trust of consumers.

Explaining why the organization needs the information apparently wouldn't hurt either.

Corey Angst, a Mendoza associate professor of management, has studied people's attitudes toward electronic health records, which entail having all of one's health information digitized and collected into one big record accessible by all of one's doctors. In 2004, the federal government mandated the establishment of a national EHR system by 2014, but the change has been met with suspicion by some over privacy issues. In a study published in the journal MIS Quarterly, Angst found that even people deeply concerned about privacy felt better about electronic records when given more information, especially about security.

Devaraj says businesses should be required by law to notify consumers about how their information will be collected and what it will be used for, and that consumers should have the option to "opt out."

Hard-liners who want to safeguard their privacy online can always try to thwart the tracking devices. Some websites allow users to keep their data private, but they typically don't advertise the option, and many users remain unaware that they even have a choice. Internet browsers like Firefox and Internet Explorer allow users to reject the behavior-tracking cookies. But users who refuse to accept cookies lose access to many of the Internet's most popular sites like Google and Facebook.

Such defensive measures strike the typical younger consumer as extreme, says Carol Phillips, director of the market research firm Brand Amplitude and an adjunct instructor of marketing for Mendoza College. Phillips studies Millennials, the generation that came of age around the year 2000. She says that members of this cohort are not just comfortable with businesses—Facebook and even retailers—knowing their likes and dislikes, they've come to expect it.

"The thing about Millennials, especially Millennial women, is that they are always shopping," she says. "They'll take a break and switch over to see what's new at shopping websites. It's almost a hobby. And they expect it to be somewhat tailored to them."

As a result of such generational differences, if you ask what the value of privacy has become in the age of Big Data, one valid answer would be, "It depends on your age."

Here's another.

In his presentation to the Commercialization Analytics class, Tullman mentioned that Amazon.com's latest tablet computer, the Kindle Fire HD, comes in two versions. One displays ads personalized to the user when the device is on but the screen is locked. The other doesn't run ads on the so-called lock screen. The ad-free version costs $15 more.

Said Tullman: "We are starting to understand much more clearly that privacy is just another thing that's for sale."