New Digital Economics Conference: Big Data Versus Privacy

The symbiotic ideas of controlling your online personal data and the value of big data analytics to companies were major themes during the March 19-20 New Digital Economics conference produced by STL Partners. Thought leaders addressed personal privacy concerns that could lead to a social movement and industry self-regulation as well as changes to how companies manage strong relationships with their customers.

Dr. John Clippinger of the MIT Media Lab’s Institute for Data Driven Design reviewed the benefits of accurate personal data capture and well-targeted use of big data analytics:

  • No Sampling; real time calculation of actual distributions. No “average customer,” only real behaviors of customers.
  • Accurate Personal Prediction; base predictions on actual biological identity, attributes, and preferences.
  • 5-10 Times Conversion Rates; the purchase offers become pull marketing. They are no longer push advertising or lead generation.
  • Machine Learning — the analytics for an individual get better and smarter as the algorithms “live off of and grow in predictive powers with data.”
  • With good data capture, analytics, and well-targeted use, advertising shifts focus from lead generation to customer retention.

Doc Searls from the Berkman Center for Internet & Society at Harvard gave a chronology of technologies and practices that were originally resisted and then embraced by business.

In 1982 the use of IBM PCs in the office overcame objections from the MIS department because they were more functional to a greater number of people than the mainframes. In 1996 the Internet started making inroads into corporations for the same reason, even though it weakened the organization’s data security. In 2008 individuals started using their own smart phones for work, pulling the organization beyond the BlackBerry culture.

Now, in 2013, he posits, we are entering the era of Vender Relationship Management (VRM), in which people take back control of their personal data and interact with vendors on more equal footing. There is visible pushback to Customer Relationship Management (CRM) tactics. Professor Searls claims that fully 10 percent of U.S. Internet users now use ad-blocking and anti-tracking software. They want to control their data and their relationships with vendors, rather than passively accept pushed ads, pop-ups and other interruptions of their online activities that rarely seem to be relevant to them. He views this as a growing cultural movement.

Microsoft’s Marc Davis told the story of how, in medieval times, serfs worked the land owned by the king, and the king determined how much they would benefit from their labors. Eventually the serfs demanded the right to own their own land and directly profit from their work.

Today, in the digital world, corporations own virtually 100 percent of the generally used online landscape. We are allowed to work and play there if we accept the terms of use. Click licenses include non-negotiable language that requires us to surrender an increasing amount of personal data and authorize the tracking of our online activities. The Internet has evolved, he argues, to where we are now “digital serfs” providing far more data to the organizations whose resources we use then we get from the use of those resources.

Echoing Searls’ point, Davis believes that consumers are waking up to this imbalance. He noted that the EU has regulations limiting how corporations can use personal data, and the White House has proposed an Internet bill of rights.

Michal Pasternak from Huge Inc., a user-experience design firm, reported that, in a recent market research study she conducted, digital natives didn’t understand what was meant by the question, “What do you do when you are offline?” Given that the boundary between living in the physical and virtual world is fading, the interest in giving consumers the right to control their personal digital identity is increasing in many quarters.

On the flip side, the value of letting vendors access personal data was well stated by Cary Tilds, GroupM Next chief innovation officer. She pointed out that, “without access to your personal data, a smartphone isn’t smart.”

Clippinger described efforts at Harvard Law and elsewhere to develop a more balanced approach to online licenses. It involves “negotiable computational contracts.” A computational contract describes, in plain language, what personal data the person must allow the application to access in order for the application to be useful (i.e., enable the application to provide information personalized to the user.) The “negotiation” is a series of check-box tradeoffs that describe what you gain or lose from the application if you allow the application to use more or less of your personal data. The resulting choices can be enforced through software.

If the personal privacy concerns discussed at this meeting develop into a social movement, it may lead to new industry self-regulation standards and practices, escalated discussions in governmental regulatory bodies, and increasing pressure from a mobilized consumer population. In short, it will impact the strategy ETC member companies pursue to increase their revenues and maintain strong relationships with their customers.