Privacy Is Overrated

Over the years, I have been part of many debates on panels and in living rooms on customer privacy. My stance has always been, "consumers don't care about privacy if the exchange benefits them." one study conducted across 372 cities and towns in Germany, we involved the collaboration of 3,544 retailers, stores, and merchants. Firms uploaded coupons onto a mobile app, and by enabling their GPS feature and sharing their real-time location information, consumers were able to receive these deals. Consumer engagement rate of these location-based coupons exceeded that of other, more traditional mobile ads by a magnitude of three to 10 times.
To find out whether consumers would be willing to give up their physical location in exchange for benefits, my co-authors and I conducted a set of elaborate studies at one of the largest shopping malls in China. The mall contains over 300 stores spanning 1.3 million square feet and attracts more than 100,000 visitors per day. At the entrance of the mall, customers were offered the option of accessing free wifi service in exchange for allowing the mall to monitor their shopping trajectories and send them personalized coupons and ads as they went about their shopping. My initial expectation was that a very small number of customers would opt in to this kind of explicit data-sharing relationship with the mall. But as it turned out, more than 75% of customers opted in, basically saying, “Take my data and give me an offer I can’t refuse.”

Is a model where consumers pay for privacy on the horizon?

As these opt-ins become more and more common—and harder and harder to avoid—I believe a model will soon emerge in which people will pay a premium for data privacy. Put another way, people are beginning to demand a fair exchange for their data and want to negotiate the terms with brands to mutual advantage.

For example, last year when AT&T deployed its high-speed fiber internet service to compete with Google Fiber, it had an interesting pricing model in Kansas that captured this concept of a “privacy premium.” The service was priced at $70 a month to match the price of Google Fiber—but if subscribers chose to opt out of AT&T’s “Internet Preferences” program, which recorded users’ browsing and search history, they would have to shell out an extra $29 a month. 

Only a matter of time.