December 16, 2021//Neal KindschiLast Updated: May 19, 2022
As Big Tech is under attack from Congress and the public about how they handle and monetize customer private data, some companies have chosen to pivot. Instead of collecting and profiting off of consumer data, their focus is on protecting privacy.
The strategy isn’t purely altruistic. On the contrary, committing to data privacy offers a competitive advantage that is forcing other companies to play catch up.
According to a recent Pew Research Poll, the vast majority of people are concerned about both government and corporate data collection, but they don’t know much about it:
There are four types of data collection:
Tech and eCommerce companies collect data in one of three ways:
Because by nature, data is nebulous, and because companies don’t exactly broadcast how they’re using data, consumer concerns are understandable. Judging by some companies’ behaviors, concerns are warranted.
Most companies store data on the cloud, or on large servers located away from the company’s headquarters. Some store it on-premises.
Whether formal or informal, companies have always collected data, and it’s not always a bad thing. Merchants tracked who entered their stores, when the stores were busiest, which items sold well and which didn’t, etc. Without data, businesses would have no idea what their customers wanted, when and what they should restock, and what should be returned to the vendors.
Then, data collection went on steroids, but it’s still not always a bad thing. Data collection can improve the customer experience. Data-based targeted advertising might make some feel violated, while others appreciate that they see ads for things they want or need. Some use data to help improve data security. Some examples are facial recognition, voice recognition, the last four digits of your Social Security number, and other methods of securing personal data.
Despite some consumer benefits to data collection, the biggest beneficiaries are corporations. They use data to define and refine their marketing strategies, to collect more data, and in the case of social media and search engines, to sell data to advertisers.
In April 2020, Zoom allegedly automatically linked users with their LinkedIn profiles. Even if they signed in with an anonymous name, fellow users could see the real name and LinkedIn could use the data to sell advertising.
Google allegedly violated children’s privacy through its G Suite for Education platform. According to a California lawsuit, the platform unlawfully collects biometric data from children. If found guilty, Google is likely in violation of the Children’s Online Privacy Protection Act (COPPA) which requires parental consent before data mining from children under 13.
Facebook misled users and compromised privacy when they allowed Cambridge Analytica to harvest political data through a third-party app from a Facebook quiz. The social media giant was fined $5 billion from the Federal Trade Commission.
Ring Doorbells, which lets subscribers view and communicate with anyone who comes to their door, is riddled with third-party trackers that collect sensitive information, such as name, IP addresses, etc.
These are just a small selection of the most notable examples. Each day, it seems, the news cycle is filled with stories of major data breaches or corporate violations of public trust.
Despite the fact that we are in the era of big data, the government has done little in the last 20 years to protect our data. In the last 50 years, Congress passed four significant pieces of privacy legislation:
While the federal government is lagging behind, more than 20 states have passed bills protecting customer privacy.
In April 2021, Apple released an iPhone update, called App Tracking Technology (ATT), that allowed users to opt out of sharing data with advertisers. Most iPhone users chose to opt-out, which turned out to be a brilliant marketing tactic for Apple but a massive problem for others in Big Tech.
Because many mobile apps run mechanics in the background that track user behavior after seeing an ad, including clicking on the ad and making a purchase. Because Apple controls half the mobile device market, their update prevented advertisers from tracking ads’ success.
As a result, both advertisers and platforms for whom advertising is their main revenue source are experiencing consequences. Meta, Facebook’s parent company, is reeling from flat sales in the third quarter of 2020. While that might not seem disastrous, without the Apple mobile operating system (iOS) update, Meta claimed, they would have experienced growth.
More significantly, Snap, Snapchat’s parent company, suffered significant losses in the third quarter, for which they blame Apple’s changes.
At the same time, Peloton, who is an advertiser rather than an advertising platform, claimed that the iOS update hurt user growth.
As for Apple’s stock, in the third quarter, it rose over 36 percent. It’s impossible to determine with absolute certainty that Apple’s update was the singular cause of Apple’s stock rising. Some of that could be due to escalating murmurs that they will soon release some long-awaited products. However, it is clear that consumers are very concerned about how their personal data is used.
Apple is far from an anomaly. The majority of companies have shown that protecting data is good for the bottom line.
There are four steps companies can take to protect privacy: