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The annoyed and confused consumer – privacy concerns

In the following lines I will present the consumer perspective in terms of privacy issues. The willingness of disclosing personal information is seen as dangerous when thinking about issues like cybercrime, child abuse or reputation. On the other hand, giving away personal data can be profitable, if we think about business models such as Spotify, which allow users to access music for free only if they provide their contact information. From the business perspective, private data can be used to better target consumers, allows price discrimination models and can offer valuable feedback information. However, the topic is still controversial.

Researcher Szoka Berin argues in a paper on targeted online advertising that users should be free to opt out from whatever tracking they disagree with, BUT not without a cost. The internet is open to everyone, but the new currency is private data. Therefore, if a user shares less private information, he or she expect to receive less content and services for free.

Content creators and service providers should be free to choose the appropriate balance. The economic base for content and services will be smaller if it’s easier for some users to receive without sharing. [1]

Other authors, such as Acquisti Alessandro, Leslie John and George Loewenstein from Carnegie Mellon University argue that privacy valuations are inconsistent and highly dependent on subtle framing. In their study “What is privacy worth?” they explicitly contrasted individuals’ willingness to pay to protect data to their willingness to accept money to reveal the same data. The results of the experiments show that what people say their data is worth depends critically on the context in which they are asked – specifically, on how the problem is framed. The study concludes that individuals’ decisions about their data are sometimes taken as representing their true and final preferences towards protecting personal data. Therefore they wrongly become an instrument for designing privacy policies.[2]

Research has further shown that when people are uncertain about their own values, which is likely to be the case for privacy, they are more likely to be influenced by contextual factors in their decision-makings. If the material value of privacy is already extremely difficult to estimate, the psychological value is likely to be even less well defined, creating the kind of ‘preference uncertainty’ in which inconsistencies in judgment and decision making commonly emerge: the “privacy paradox“.[3]

In another paper, Alessandro Acquisti argues that market forces and economic laws, if left alone, would eventually result in the most efficient amount of personal information being exchanged. The main concerns of individuals using new information technology are those related to cybercrime, identity theft, credit card frauds or future price discrimination. Therefore, billions of dollars are lost in missed sales. However, when it comes to protecting private data, individuals tend to look for immediate gratification, underestimating the future risks. Although paradoxical, from an economic perspective, those individuals who demand privacy but take no action to protect theirs are actually acting rationally. The paper concludes that economics will need to be assisted by law and technology to actually achieve the balances it proposes.[4]

[1] Szoka, Berin, Targeted Online Advertising: What’s the Harm & Where Are We Heading? (2009), In ”The Technology Liberation Front”, http://techliberation.com/2009/02/13/targeted-online-advertising-what%E2%80%99s-the-harm-where-are-we-heading/ Last consulted on 20 January 2013

[2] Acquisti Alessandro, Leslie John and George Loewenstein, What is privacy worth?, Carnegie Mellon University

[3]Leslie K. John, Alessandro Acquisti and George Loewenstein, The Best of Strangers: Context-dependent willingness to divulge personal information, Carnegie Mellon University

[4]Acquisti, Alessandro, Chapter 1, Privacy and security of personal information, Economic Incentives and Technological Solutions, H. John Heinz III School of Public Policy and Management, Carnegie Mellon University


One comment on “The annoyed and confused consumer – privacy concerns

  1. Pingback: Social Media in Business Class Blog | Privacy, Economics, and Price Discrimination on the Internet

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This entry was posted on October 18, 2013 by in Privacy online and tagged , , , , , .
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