Your Data Privacy Is Worth More Than 65¢… Right?By: Drew Bowling - March 17, 2012
You may not want to hear this, but one explanation for that precipitous drop in interest could be that one in three online consumers only value their data privacy at a whopping 65¢.
I know anyone reading that just emitted a collective “nuh-uh” but it’s true. A new study called “Study on Monetising Privacy: An Economic Model for Pricing Personal Information,” by the European Network and Information Sharing Agency, revealed that consumers aren’t likely to spend more than $0.65 to protect their private information like email addresses and phone numbers.
Sören Preibusch, one of the researchers who worked on the “Monetising Privacy” report, detailed how the study was conducted:
We invited 443 participants into the laboratory where they could shop for cinema tickets. The laboratory experiment was complemented by a field experiment with over 2,300 participants and 139 transactions and observations. The field experiment confirmed the trends observed in the laboratory; the only difference noticed is that in case of no price difference the privacy-friendly service providers which request less personal data obtained a greater market share.
Participants had the choice between a privacy-friendly firm and a privacy-unfriendly firm. Because the tickets were delivered electronically, both companies required a minimum of personal information: full name, date of birth and email address. Depending on treatment, the privacy-invasive seller also requested the mobile phone number or permission to use the email address for marketing. We had checks in place to make sure that correct data was provided.
The majority of participants purchased two tickets and remained loyal to the seller where they had bought the first ticket (93%). The laboratory experiment also shows that the majority of consumers buy from a more privacy-invasive provider if the service provider charges a lower price—50 Euro cents in our case [that’s $0.65 in the U.S.]. A non-negligible proportion of the experiment’s participants, however, chose to pay a premium for privacy. The privacy-friendly firm achieves a market share between 62% and 83% if there are no price differences. 29% of the buyers were willing to pay extra for not having to reveal their mobile phone number; this share drops to 9% for avoiding marketing emails. However, these numbers send a clear message: A sizeable proportion of consumers are willing to pay a higher price for privacy. Online businesses can capitalise these concerns. Privacy-friendliness is a win-win for online retailers and their customers.
While it should be encouraging that consumers will opt for “privacy-friendly” providers when there is no price difference, that much should be obvious; no more than telling a driver to choose a lane of traffic that is gridlocked or a lane where no other cars are present. Further, it’s discouraging to find that people will forgo concerns of their privacy at even the slightest hint of a discount. 65¢? Really? That officially makes you the cheapest date ever, internet users. Your privacy is worth more than that.
The last part of Preibusch’s explanation is telling, though: people are willing to pay to ensure their privacy.
Don’t hold your breath on Google offering up a premium-level account anytime soon that would secure your private information and keep it from being held indefinitely or used in arcane ways. Nobody’s even really sure at this point about the extent with which Google will use your information. Still, as evidenced in the ENISA study, people will go for the cheaper option at the expense of their privacy, and Google knows this. And Google’s products don’t get any cheaper since they’re technically free.
So then, let’s suppose that Google really did listen to the outcry over their new privacy standards. As the ENISA report states, “privacy-friendliness is a win-win for online retailers and their customers.” If Google really did offer up a pro-privacy, premium level account at a reasonable fee but you’d still get all the unfettered access to their services as you do now, would you do it? Given the choice, would you stick with Google’s current privacy model and just continue to use the free services while actually paying for them with your user information?
How much is your privacy really worth to you? Add your comments to our discussion below.
Note: anyone interested in reading ENISA’s full report can download the PDF here.