Tuesday, October 16, 2018
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How Companies Use Your Data


Caption: Popular social media apps on a phone, including Facebook. These apps collect user info and make a digital profile of each userg based on his or her posts, interests, and other data. Source: Tray Le Blanc via Pexels

Facebook’s recent PR debacles involving user privacy, data collection and targeted advertisements have worried many about the privacy of their data online. For many, Facebook’s recent exposé is a reminder that the internet is not a safe vault for personal data. Yet Facebook’s recent breach highlights the digitalized advertisement industry’s data collection push.

A typical example is how Google tracks its users, often without their knowledge. In the public view, Google has evolved from a search company to an ambitious technology company, with grounds in various new developments from self-driving cars to Wi-Fi balloons. Yet Google still depends on the search engine for the overwhelming majority of its profits. In 2016, advertising services accounted for nearly 90% of Google’s revenue stream. Similarly, 98% of Facebook’s revenue comes from advertising on its social media platform as of 2017. While these companies aggressively expand into other fields in the public view, they have been just as aggressively improving their advertising business under the shadows, which includes mass data collection. This aggressive expansion is based on changing the consumer-advertisement relationship.

Caption: Advertising revenue has increased dramatically over time. For comparison, Google made 110 billion dollars in net revenue in 2017, of which 95 billion were from advertisement revenue. Data from Google. Chart from Statista.

To most consumers, advertisements are often an annoyance. They are distracting and often interrupting. A classic example of this are newspaper advertisements over a century ago. The local hospital may want to place an ad in the local newspaper to spread word about the new newborn care center. By placing such an ad, the hospital wants readers to take notice if they have an newborn. Readers buy newspapers for many reasons: keeping up to date on the economy, reading about the new local park, or just to have a glance at the daily headlines. But whatever the reason, most readers are not buying the newspaper to read about the new newborn care center in town. Yes, most readers will give a glance at the ad, but will quickly note it as irrelevant and ignore it. The advertisement has failed to serve its purpose, annoying, not attracting, the reader. The advertisement has wasted the hospital’s money.

In a town of several thousand people, some readers will find the advertisement relevant; perhaps because they have a newborn . But a majority will find the ad irrelevant. Had the barber known who was planning on getting a haircut, he or she could have advertised only to them, and not wasted money advertising to those who will never need a newborn center, for example a grandfather.

It would be impractical to print a different newspaper for each person, depending on what their likes are, as it is cheaper to print a thousand copies of one paper than one copy of a thousand papers. It is also hard for newspapers to ensure that the newspaper made for John goes to him, not his neighbor David, especially if they buy their newspapers from a store, instead of having them be home-delivered.

Personalized ads were not feasible on a large scale in the mediums of the nineteenth and twentieth centuries – print, radio and TV – because of the cost of personalizing programming and the inability to ensure that the ad is read, heard or watched by the audience that was targeted due to the inability to track a viewer.

Now here’s where the internet comes in.

Companies like Google, Amazon and Facebook are vital to our internet life. We often login to our Google accounts when on Chrome, the launching point for most other online actions. We connect our Facebook account to various games and apps. We search much of our shopping interests on Amazon. Smart assistants, including Amazon Alexa and Google Assistant, gather info about our personal lives. And there are all the apps we use on a daily basis, such as Calendar or Email. All these aspects of our daily lives collect our information.

These companies build a profile for each user. For this advertisement example, we will consider Amazon. Amazon learns the products that you are interested in. If I am searching for a certain type of shoe, Amazon adds shoes to my “user profile.” When Amazon Advertising selects an advertisement to display to me, it will likely choose advertisements that align with my interests, namely shoe advertisements.

Using this technique, referred to as tracking, companies build user profiles and then use them to target advertisements to people the most likely to click on them. Thus, tracking increases advertising effectiveness dramatically. Small children won’t receive SUV ads, only those recently interested in SUVs will see the ad.

Amazon best explains tracking on its advertising website, noting that, “Amazon’s self-serve ads are targeted to customer search terms, products, or interests, helping you get discovered by customers right as they’re shopping for products like yours.”

Tracking helps make advertising effective. Advertisers will use advertising services, which are the middle-men between the advertisers, users, and data collector, that are the most effective. Thus, effective tracking is vital to the survival of an advertising service.

These advertising services are often from the very same companies who provide us daily tools, for example Google Adsense, Amazon Advertising and Facebook Business. The more data these companies gather, the more effective their tracking is, and the more advertisers and money they lure.

There is a clear conflict of interest present, as we expect these very companies to keep user data secure and collect limited amounts of it, while those actions hurt their business. Scottish philosopher Adam Smith claimed that humans always commit actions in “regard to their own interest.”

Data collection means profits. Increased data collection also means more valuable data that can be stolen from a holder whose security policies are not controllable by us. Facebook’s recent scandal has highlighted multiple security flaws in their system. For example, if a user took a quiz made by Cambridge Analytica through their Facebook account, Cambridge Analytica would gain access to personal data of the user and their friends, without their friend’s permission. Data is openly given for “academic purposes,” yet Facebook did not have strong enforcement of what is academic and commercial. Facebook had lousy security practices.

Caption: Cambridge Analytica’s misuse of person data to influence the U.S. election has worried many about the policies surrounding data collection and use.

We would not deposit money in a bank that keeps money in an open box, with no security cameras or guards. Likewise, we cannot trust these companies with our personal data when their security systems are such easy to exploit. But if we are depositing money in banks, we can switch our deposits to some other bank, of which there are 6,799. But these internet companies often have little competition and lousy security practices. Prime examples include LinkedIn, Google and Microsoft.

Caption: The building of the European Parliament, which has recently enacted laws that tighten the security of user data and give users more control over their data. Source: Bluffton University.

Strict governmental regulations are the only way to control these, often monopoly-lie, companies. Europe has recognized this challenge, and it is starting to take preventive actions such as the recent right-to-be-forgotten law. Now it is time for U.S. lawmakers to adopt policies that, like Europe’s, regulate data collecting and advertising services so that their data collection is limited and security is plentiful. We must create regulatory bodies that actively check and improve company practices. We must have harsh penalties for failing to follow rules. And most importantly, we must create an America in which secure handling of personal data is not just a law, rather it is a central part of our culture.

 

Jonathan Qiao contributed to this report.

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