Cambridge Analytica, a data-focused political consulting firm, is under fire for improperly collecting and retaining Facebook user data in order to micro-target voters and for making unguarded comments about election manipulation tactics to an undercover reporter. Facebook took out full page ads in major newspapers to apologize for the scandal. The open letter, signed by Mark Zuckerberg, started off by acknowledging a responsibility to protect user information.
Facebook’s stock has plunged. The fallout could prompt new legislation, similar to the GDPR in the European Union. The FTC has opened an investigation into the social media network’s privacy practices. Germany’s Federal Cartel Office warned that Facebook must change its methods or face sanctions, stating, “We criticize the way the company collects and exploits personal data as a possible abuse of its market power.”
But all of this is just one aspect of a broader conversation about privacy-intruding technologies and the public’s perception of a value exchange. Taking the long view, it is likely that discomforting technologies are here to stay.
This may be a difficult proposition to accept, given that Facebook just lost $80 billion in market cap in about a week. If new regulations are imposed, marketers may find themselves restrained in their efforts. However, it isn’t obvious how the lines should be redrawn. It has also been argued that the Cambridge Analytica scandal is only getting media attention because it plays into an existing narrative that rationalizes Hillary Clinton’s unexpected loss. According to this viewpoint, the scandal represents a political double standard: the Obama campaign exploited Facebook data without attracting the current level of criticism, although its exact methods differed. If temporary politics is informing the outcry, then this scandal could be an anomaly.
For marketers, data-driven consumer research is simply too valuable to forgo. For overburdened lawmakers, the issues may prove too complicated to dissect and regulate with consistency. For consumers, there is a tradeoff that must be acknowledged. The quality and affordability of many products and services is entirely dependent upon the exploitation of consumer data.
Earlier this year, I wrote about the ways that location-based analytics could boost retail sales. In my article, experts suggested that brick-and-mortar businesses could survive in an increasingly competitive digital age by leveraging a comprehensive view of consumer buying patterns. I mentioned Toys ‘R’ Us as one example of a struggling retailer.
Many people in my network confided to me that location-based analytics frightened them. While they conceded that there are clear benefits for businesses, they didn’t like the thought of companies tracking the whereabouts of their smartphones and reverse-engineering their shopping patterns. Surveys have widely reflected this consumer discomfort.
A few months later, Toys ‘R’ Us announced that it was going out of business. This prompted a wave of nostalgia and mourning across social media and news outlets. Many articles adopted the tone of an obituary, with one headline crying out, “Way to Kill My Childhood.” It was even reported that a child submitted a handwritten letter to the bankruptcy docket, urging a judge to prevent Toys ‘R’ Us from closing because it “will be bad for kids.”
All of this exposes the great contradiction at the heart of the privacy debate. People express discomfort at the thought of having their data exploited for commercial purposes, but then they mourn when their beloved brands fail to be commercially successful. You can’t have it both ways.
I am not suggesting that the toy store chain went bankrupt simply because it failed to adequately snoop on the buying patterns of parents. Obviously, the chain’s financial problems were multifaceted. However, ecommerce has dealt damaging blows to a series of beloved brands. At one point in recent history, there was an actual market for books, made out of paper, in giant free-standing structures on concrete slabs at shopping centers across America. The traditional book market, which also conjures up nostalgic feelings from bibliophiles, has almost completely collapsed.
eCommerce (largely, Amazon) was able to kill all of those stores because it made shopping more convenient. If we want cherished brick-and-mortar brands to continue to survive, we need to allow them the technological wiggle room to optimize their marketing and inventory based on customer wants and needs. And that will require surrendering some of our privacy. Most people understand this argument logically, but still, how can we deal with the unsettling feeling that the wall separating our personal lives from the public world has been gradually chipped away, if not aggressively bulldozed?
Even technologists are uneasy. Pablo Duboue, whose work focuses on applied language technology and natural language generation, was shocked when Ok Google and Amazon Alexa first came out.
“Why would you put an open microphone for a major corporation in your living room?” he asked, mystified. “The sanctity of your home violated, just to know ‘what is the weather?’”
As I interviewed executives at various technology companies, it became obvious that there is a pathway forward for privacy-intruding technologies, despite the understandable backlash.
Ellie Mirman, CMO at Crayon, pointed out that consumers are regularly posting new content that they want others to see. “In order to limit data access from ‘bad players,’ you also have to limit access from your intended audience,” she told me.
She thinks that organizations will continue to develop ethics policies on data collection.
Mirman said, “Overwhelmingly, I see companies and consumers alike rave about personalized web experiences like Amazon and Netflix, and revolt against undisclosed data collection by apps like Facebook and Uber. Given the dependency of data-powered experiences on data collection itself, the path forward is not simply limiting what data can be used, but rather guiding how companies disclose their practices to empower consumers to make educated decisions.”
Nimble regulations, ethical guidelines, and transparency could help to mitigate the “creepiness” factor of new technologies and methods of data exploitation, allowing the trend to continue. Despite the recent Cambridge Analytica scandal, most consumers have already accepted technological encroachment into areas previously considered private.
Cataloguing friends into an online social network was once a questionable prospect, but by now the average Facebook user has entrusted a lifetime’s worth of intimate expressions and communications to Zuckerberg’s network. People were once weirded out when sites displayed ads based on search history. But many of those same people came to accept Tinder into their lives, which is essentially sex and relationships filtered through data analytics. They also didn’t bat an eyelid when Gmail’s Autoreply feature volunteered to compose messages to their contacts on their behalf. The discomfort factor is usually temporary and weighed against benefits. Overall, consumers seem to opt-in.
“Once people realize how useful it is, it’s really not creepy anymore,” said Eric Keating, VP of Marketing at Zaius. “You should ease buyers into location-based analytics, including push notifications and in-store alerts. These technologies specifically can be intrusive and feel invasive if not done thoughtfully. Ideally, you want to understand how and where your buyers interact with your brand in order to personalize their experience. That means unifying their identities across channels and devices through technology like a B2C CRM.”
Kalon Welch, EVP of Business Development at FastSensor, thinks that the cat has been let out of the bag. “Today’s consumer is more aware than ever of the fact that they are being studied and modeled through complex technology and machine learning algorithms,” he said.
Welch noted that some of these controversial technologies are capable of delivering substantial benefit by allowing retailers to hone in on very localized and personalized demand and respond to it quickly or in real-time.
Welch continued, “Privacy and the sharing of personal data is a market system like most others in this world. As long as it is clearly understood, consumers will decide how far it goes and what they are willing to share. Over time, we have seen the market dynamics of data swing deeper into the sharing side of the equation.”
He explained, “For example, at FastSensor, a key differentiator is our ability to passively and anonymously monitor consumers at over a 98% penetration rate without access to PII (personally identifiable information). We are watching your behavior but don’t know who you are unless you want us to. If our clients do desire to know your specifics, they ‘trade’ you something of value for that right. We want consumers to understand that data equals currency in this day and age! For example, many offer free WiFi, coupons, free productivity apps, loyalty programs or other incentives including personalized and custom-tailored experiences. We promote transparency with the consumer and want them to willfully make this trade for their own benefit. They also, of course, have the right to choose not to and always should.”
But can we still opt-out?
Privacy advocates have fewer issues with new marketing technologies and intelligence tools when they’re offered some type of value in return. If privacy advocates don’t appreciate the value they’re receiving, the counterargument is that they can opt-out. It’s worth examining the validity of that option.
Sure, you could always buy some cheap land in the Southwestern United States and live off the grid in a solar-powered tiny home, eating prairie dogs and rattlesnakes, free from corporate and government intrusion into your digital devices and activities. But what about the middle-of-the-road folks who simply want to maintain a shred of privacy in these increasingly complicated digital times? If someone refuses to own a smartphone, it could be nearly impossible for them to get a job and keep it. If I don’t use the points card in my local grocery store, an item might be five dollars more expensive. Financially, it’s harder and harder for people to opt-out of corporate tracking mechanisms.
I directed this counterargument to Craig Alberino, founder of ALTA AI Partners.
“There’s got to be something in it for the business, too,” said Alberino. “And if the business is giving you five dollars off a product, they may be selling that as a loss leader. They may be selling it under what they actually paid for it, and that’s actually the key with the things like the Costco chicken, you know the famous Costco chicken that they sell under cost. It gets you in the store. And so they have to have an understanding about what they are getting for it, and what they’re getting in exchange for it is data. And what does that data allow them to do? That data allows them to do more targeted marketing and save on their advertising costs.”
Alberino pointed out that businesses would need to use scattershot advertising methods if they were deprived of that data, spreading their budgets across print flyers, TV ads, radio, and digital marketing avenues, all in the hopes of connecting randomly and meaningfully with the right consumer. When consumers sign up for these loyalty programs, they are establishing relationships with businesses and enabling those businesses to deliver more value and operate more efficiently. They are participating in a clear value exchange, which is ideally premised upon trust and transparency.
Trust is integral to this public conversation. Zuckerberg’s mea culpa acknowledges that users have placed their trust in Facebook, framing the company as a community that people believe in. The U.S. and British governments have both requested his oral testimony before committees. If and when that testimony occurs, marketers everywhere will likely be watching. If lawmakers and the public turn against data mining, there will be considerable consequences.
“When you look at the function of marketing, and the way that marketing has evolved, data is foundational to everything that we do,” said Cisco’s Michelle Chiantera. “And with some of the restrictions that have been put in place and what’s going on over in Europe, it’s going to have a direct impact on a marketer’s ability to deliver. You know our mantra in Cisco is we want to create real-time, personalized experiences. With some of these restrictions, we’re not going to be able to do that.”
