You Say You'd Give Up Online Convenience for Privacy -- But You're Lying
Money is not a client of any investment adviser featured on this page. The information provided on this page is for educational purposes only and is not intended as investment advice. Money does not offer advisory services.
The New York Times' Bits blog recently reported on a worldwide poll that asked, among other things, if those surveyed would be willing to trade their private information for a more convenient online experience; 51% said no, and only 27% said yes. (The rest were unsure or didn't have an opinion.) The majority also believed "businesses using, trading or selling my personal data for financial gain without my knowledge or benefit" were the greatest threat to their online privacy.
If customers really did prefer privacy to convenience, these findings would be a blow for companies like Facebook and Google, which have built their massive businesses around the personal data their customers hand over for free. But, luckily for Mark Zuckerberg, Larry Page, and their respective shareholders, online privacy is an area where few of us act on our stated intentions.
Some, like Bits' Steve Lohr, explain this phenomenon by arguing that many Internet users simply aren't aware of the tacit bargain they make when using online services. But if that's the case, it's hard not to feel that such ignorance is at least partly willful. The Word Wide Web is in its 23rd year, and privacy scandals involving internet firms are too common to miss.
Take the example of Google, which has been the subject of repeated accusations for everything from wiretapping to illegally collecting passwords, usernames, and other personal information from nearby wireless networks. In 2012, the company was fined $22.5 million dollars by the Federal Trade Commission for misrepresenting its tracking policy to users of Apple's Safari browser—the largest penalty for violating an order in FTC history.
If privacy was a primary concern of Internet users, a track record like this would hurt Google's business. Search engine rival Microsoft built an entire ad campaign, "Scroogled," around the notion that people would flee Google in droves if they knew how much of their data the search giant was grabbing. Instead, web users apparently tuned the ads out: Google's Gmail continues to prosper, its search engine remains dominant, and its Android operating system, which extends the company's data mining operation to your mobile device, runs on 80% of the world's smartphones. Microsoft killed "Scroogled" earlier this year, effectively acknowledging that customers don't care if Big Brother looks over their shoulder -- as long as he offers a high-quality product in return.
The pattern is clear. Surveillance angst may make headlines, but users will choose their favorite websites and services over privacy almost every time.
If people are so indifferent about their online privacy, why do they say otherwise? The answer probably comes down to consumers talking about what they want instead of what they'd be willing to use. We would all like a Facebook that doesn't track us in the same way that we'd all like free donuts every Tuesday -- but that doesn't mean we aren't willing to go to Dunkin' when fantasy doesn't become reality.
And as Stratechery's Ben Thompson explains, in the case of many online services, fantasy can never be reality. Products with a strong social component (which seems to be every start-up on the planet nowadays) must be free in order to gain the large network of users that makes them valuable. (No one would use a social network that their friends couldn't easily join.) And sites that are free tend to be funded by ads, and advertisers will only pay top dollar to business that know all about their users and can show specific ads to specific sub-groups.
Ultimately, Facebook, Google, and the rest will do what the market will support. Don't want your web search service to see what you do? Use a site like DuckDuckGo, which calls itself "the search engine that doesn't track you." Tired of Facebook's prying eyes? Close your account. But until you (and a few million of your closest friends) start actively boycotting sites and apps that track, don't expect much change.
And don't expect such an exodus to occur anytime soon. Even committed privacy advocates have a hard time letting go. "Quitting Facebook isn't easy," QuitFacebookDay.com admits on its homepage. "Facebook is engaging, enjoyable and quite frankly, addictive." With enemies like that, who needs friends?