Facebook’s data privacy issue

I bet they don’t at the moment

The reaction to the Facebook and Cambridge Analytica data story has been more divided than any other technology I can remember. (Real-life) friends have closed several web accounts, beyond just Facebook, formally requesting their entire data to be wiped clean. And some friends don’t care.

Shadow profiles

But even if you quit Facebook and ask for your data to be deleted, it probably won’t. This is because Facebook stores shadow profiles about people anyway. This is one of the ways that Facebook seems to make accurate friend recommendations on the platform.

A shadow profile is a user account for a contact of one or more Facebook users.

So if you are on Facebook and have a friend called “Joe Bloggs” in your phone’s contact list, Facebook will automatically create a shadow account for Joe. If you have someone else in your phone’s contact list called “Mary Smith” who is already on Facebook, and Mary also has Joe in her phone contacts, Facebook updates Joe’s profile to say it knows Mary too.

This isn’t new, the process above was disclosed in May 2013.

Many people – I would suspect that most people – find friends recommendations useful. It’s valuable because it has helped quickly grow users’ network of friends.

Privacy is cultural

People’s attitude to data privacy is cultural.

In the Netherlands, most of the homes don’t have net curtains. You can walk along a street in the Netherlands and peer straight into people’s houses, including their bedrooms. (Please don’t try this).

In the UK, most of us have net curtains, or at least blinds, giving some level of privacy into a home.

In the US, homes have net curtains, and maybe curtains too, and in some places, external shutters too.

If you speak to someone from the Netherlands about peering into people’s houses, you’ll often get a shrug (implying “So what?”). Speak to an American about being able to see into someone’s bedroom and just the possibility is a bit weird.

The point is, privacy is a cultural viewpoint. Some people care, some don’t. And this is where we now find ourselves with personal data.

Advertising

The reason Facebook wants all this rich user data is to provide a highly targeted advertising platform to businesses (their real customers). Facebook’s ad revenue is for Q417 was $12.779bn. They also earned $193m from other sources, but 98.5% of their revenue is advertising funded. Source: Facebook

This is because companies want to advertise a specific product, in a specific way, to a specific group of users. The opposite model to this is TV, radio, print or billboard advertising – where the same advert is shown to a wide range of people. Granted, an advertiser can choose (only to a certain degree) which TV show to put their advert alongside, or choose which magazine to advertise, but it’s still relatively indiscriminate advertising.

I created this Facebook advert to target people who speak English in the Netherlands who have recently moved, are new parents and have toddlers because I want to sell them net curtains.

The goal of personalised, highly targeted advertising has been a goal for the media industry for decades.

Google were one of the first to offer this, based on the search term a user entered. What was more revolutionary about Google, was they offered this amazing, targeted platform, to the tiniest of companies. A plumber could start advertising their services to anyone searching “fix water leak” nearby. The second clever part was how the plumber could pay so little money for this targeted advertising – but that’s a tangent to the data issue.

Google then widened its knowledge about users beyond the search term. That’s why Google now provide Android phones, Google Maps, Gmail, and so on – to understand as much information about an individual as possible – with the aim of serving them with targeted advertising.

Along came Facebook, which was the first independent social platform to encourage users to use it very regularly, to pour personal data into the platform. It was the first mass scale platform to encourage users to indicate, literally, what they Like’d. It was an advertiser’s dream.

To encourage even more data, Facebook opened its platform via a comprehensive API, enabling any developer to access user data to make another website more interesting. Those third parties had to sign terms and agreements to promise not to store any of that data in their own systems. Those third parties could access a wealth of data about a Facebook user, but they weren’t allowed to store it.

That’s pretty much where Cambridge Analytica are alleged to have gone wrong.

Value exchange

Returning to Facebook’s business model – it provides users with a platform of unlimited photo storage, messaging and other content updates. And it makes 98.5% of its revenue from advertisers who want to target those Facebook users.

The key question to ask, is whether users get enough value from the platform, in return for their data being available to advertisers.

Watching a McDonald’s TV advert, even though I don’t eat McDonald’s

The second question is what type of advertising do you want? In the interest of research, I started watching live television just now and the first advert was to a sofa shop, followed by a McDonald’s advert. We bought our sofa just a couple of years ago (so we don’t need a new one), and we don’t eat at McDonald’s. I then looked at Facebook to see an advert about an innovation conference in London this July – I clicked on the link because it looked interesting.

Last quarter (Q417) Facebook’s Average Revenue Per User (ARPU), worldwide, was $6.18. In the US and Canada, it’s over $26 and in Asia it’s $2.54. How many users would pay this ARPU per quarter to keep their data from advertisers?

Maybe Facebook could offer a consumer-paid-ARPU model. Facebook bought WhatsApp, and WhatsApp used to charge $0.99 per year (after a free first year) for using their platform. WhatsApp stopped charging the annual dollar in January 2016 and made it clear in their blog post which described:

For many years, we’ve asked some people to pay a fee for using WhatsApp after their first year. As we’ve grown, we’ve found that this approach hasn’t worked well. Many WhatsApp users don’t have a debit or credit card number and they worried they’d lose access to their friends and family after their first year. So over the next several weeks, we’ll remove fees from the different versions of our app and WhatsApp will no longer charge you for our service.

Naturally, people might wonder how we plan to keep WhatsApp running without subscription fees and if today’s announcement means we’re introducing third-party ads. The answer is no. Starting this year, we will test tools that allow you to use WhatsApp to communicate with businesses and organizations that you want to hear from.

Conclusion

Whether users consider their data is private or not, is largely cultural. It’s also about the value exchange between users handing over their data (for Facebook to monetise) in return for a service.

Facebook has done a dreadful job of the communications over the past few weeks. This needs to be balanced with the media outlets reporting the story and keeping it in the headlines, are the companies that are most affected by Facebook’s advertising revenue – i.e. they are competitors whose revenue has declined due to Google and Facebook.

There are some questions remaining:

  1. Users receive a free service from Google, Facebook, and other free digital platforms, in return for companies to target them with more relevant advertising. Would users be willing to pay the ARPU that their data generates for the platform, in return for keeping their data totally private?
  2. Do users want more relevant advertising? There is a paradox between hiding user data from advertisers and having relevant advertising. This needs to be addressed.

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