Learning Facebook’s Lesson the Easy Way

In the spring of 2018 Facebook found itself consumed with a press nightmare. Large international fines, inquiry hearings, and widespread boycotts all spun into a hellish cocktail of public dissent. All of this turmoil spurred from the data impropriety allegations against Cambridge Analytica, as brought forth by co-founder Christopher Wylie. Once the investigations following Wylie’s whistleblowing had concluded, Facebook found itself (and its market shares) at the wrong end of an estimated $35B lesson about how misinformed the average user was on their business practices and intentions for their data [1]. Even throughout Mark Zuckerberg’s testimony to the Senate Judiciary and Commerce Committees, it was clear that the Congressmen — along with the general public —  did not understand why Facebook would sell user information, much less how that process could ever be exploited. One such example of this fundamental misunderstanding was Senator Orrin Hatch, Republican from Utah, as he questioned, “how do you sustain a business model in which users don’t pay for your service?”[2]. Mr. Zuckerberg was much more restrained in his answer, but the truthful response would be that the users themselves are the product!

This misunderstanding is the real trouble with the entire hearing. The majority of the questioning focused on the fact that Facebook sold consumers data rather than the mismanagement of targeted advertising using advanced data analytics. Most companies that offer a free digital service leverage the same business model and monetize the data of their users in order to sell advertisements, yet they did not have to testify before congress [3]. The free lesson that such fortunate companies must learn from the Facebook-Cambridge Analytica Scandal is that users need to be informed of the value of their data.

A core falling of most user-data centered companies is the lack of value understanding for their users. The business model of data-for-a-service (D4S) relies on trading varying amounts of personal information in exchange for some desired product for the consumer. In the case of most online news, it is demonstrated with low level access to a users internet cookies that inform simple association ads. Individuals who use ad-blocking services may receive a notification when trying to access articles stating that they must first shut this service off before continuing. This is because the consumer is not playing their part in the D4S model. The core problem with the D4S model is that there is a massive disparity from service to service as well as consumer to consumer on the exact value of data. By some marketing calculations, potential customer emails for retail chains can have a ROI as high as 8100% [4]. Other metrics have this in valued at about $100 when calculating the tangible value to an organisation to be able to contact dedicated users [5].

These large disparities can be rectified if there was an open market for data. This is precisely the desire for a company named DataCoup. This startup is seeking to remove the asymmetries in the user-data market by directly connecting members information, such as credit cards and social media sites, to companies desiring to purchase consumer data. The money made by the sell goes directly to the user with fees being retained by DataCoup for making the connection [6]. This brings more transparency to the market that D4S companies need to head, and incentivizes consumers to play into the business model willingly.

One such way a company could take the lead in this area may be discounts for receipt data. If a company such as Wal-Mart wanted to more transparently lever personal information of their users, members could sing up to have a shopping profile. This may include basic personal information such as age, gender, approximate income, and current address. Once validated, any time members went shopping they could have the option to share that receipt with Wal-Mart and receive a 5% discount on their basket. This allows Wal-Mart to avoid the pitfall of Facebook by showing users the value of their data, as well as gaining incredibly valuable, specific market data at a fraction of the market research costs. This model could be considered a data for product (D4P) model.

By moving to a D4P method, applications and organization may be more forthright in their intentions of users data. The transition from D4S to D4P is not difficult. Apps desiring to sell user information to pay for their services may offer the user either a paid, data-mining free version, or may carry on with the non-paid version that does leverage data services in exchange for free usage. While there is no denying that Facebook mishandled user information, the scale and violence of the outrage may have been greatly suppressed had users been more informed on the value of their data or if they had been willing to take less risk in the selling of user data.

[1] Shen, L. (2018, March 19). Why Facebook Suddenly Shed $35 Billion in Value. Retrieved from http://fortune.com/2018/03/19/facebook-stock-share-price-cambridge-analytica-donald-trump/

[2] Tibken, S. (2018, April 11). Questions to Mark Zuckerberg show many senators don’t get Facebook. Retrieved from https://www.cnet.com/news/some-senators-in-congress-capitol-hill-just-dont-get-facebook-and-mark-zuckerberg/

[3] McRae, H. (2018, April 07). Companies have been selling our data in exchange for ‘free’ products and services for a long time – Facebook’s not so different. Retrieved from https://www.independent.co.uk/voices/facebook-data-scandal-free-products-sheryl-sandberg-a8294006.html

[4] Shopify. (2014, May 12). 7 Ecommerce Email Campaigns You Should Steal Today. Retrieved from https://www.shopify.com/blog/14107733-7-ecommerce-email-campaigns-you-should-steal-today

[5] Jenkings, R. (2014, April 4). How much is your email address worth? Retrieved from https://www.thedrum.com/opinion/2012/04/04/how-much-your-email-address-worth

[6] DataCoup. (2018). Mission Statement Retrieved from http://datacoup.com/docs#mission