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What if we compensated consumers for their data?

The current model takes data from consumers without meaningfully rewarding them. It’s easy to see why there’s such a high level of resentment toward data-centric digital businesses.

What if we compensated consumers for their data?
[Source photo: GP Kidd/Getty Images; Karolina Grabowska/Pexels]

Data is the new oil.

This opinion, first espoused by the British mathematician Clive Humby in 2006, isn’t wrong per se. Just as light sweet crude transformed the economies of the 20th century, data is the lifeblood of today’s high-value tech companies. Data has created trillions in revenue and market value over the past decade alone.

But here’s the problem: Most people—particularly in the digital services space—have a pretty shallow understanding of that analogy. Yes, just like crude oil, data is incredibly valuable. Google is basically ExxonMobil, except instead of wearing a hard hat and a high-visibility jacket, it’s sporting a nifty Patagonia vest.

Popular opinion often glosses over another unhappy element within this comparison: flows of data, just like oil, can be restricted. Data producers and consumers can be sanctioned, either by governments or rival technology companies. Or, as is often the case, by private individuals themselves. There’s no shortage of tools that can protect you from the voracious appetites of the modern adtech industry.

If your business relies on data—particularly that obtained from third-party providers—as a core revenue driver, you’re likely feeling the same level of squeeze felt by the Carter Administration during the 1970s. But here’s the thing: whereas OPEC eventually lifted their oil boycott of the US, today’s data consumers are unlikely to see an immediate reversal of fortunes.

Let’s face it: Apple isn’t going to get rid of its App Tracking Transparency technology, which cost Meta an estimated $13 billion in 2022 alone. GDPR (nor the legislation it inspired in other states and nations) isn’t going away. Alphabet is still determined to kill the third-party tracking cookie in 2024.

Data consumers have a choice: decline or adapt. Or, sticking with the oil metaphor, they can continue to pay higher prices at the gas station—or they can adapt and invent the electric car.

What does that adaptation mean in practice? Well, we could start by reexamining the relationship between the tech industry and individual consumers. The current model takes data from consumers without meaningfully rewarding them. And so, it’s easy to understand why there’s such a high level of resentment and mistrust toward data-centric digital businesses.

But what if we rewarded—or, better yet, directly compensated—consumers for their data?

A TALE OF TWO COMMODITIES

Oil was a necessary component to the success of America’s automotive industry, to give just one example. But it was even more lucrative for the oil producers. It led to the unfathomable wealth of countries like Saudi Arabia and Kuwait. This relationship, though occasionally lopsided, benefited everyone.

But what do today’s data suppliers—you and me—actually get? Well, yes, I suppose Twitter and Gmail are all free. There is no shortage of internet startups pining for our attention. It’s possible to live our entire lives online, in the Freemiumverse, without having to pay for any services whatsoever.

But that begs the question: Is that a fair trade? Personally, I don’t think so. If people are the data equivalent of Saudi Arabia’s oil fields, why haven’t we seen any real or substantial transfer of wealth? At the time of writing, Alphabet has a market cap of $1.3 trillion. If we divide that sum by its 4.3 billion users, we’re left with $325 per person.

Obviously, there’s a huge difference between market cap and revenue. One figure represents the worth of a company, whereas the other denotes the amount of cash it makes before costs and taxes. Nobody (at least, nobody credible) is suggesting that Alphabet liquidate its assets and hand the proceeds to its users.

However, that simple mathematical exercise does demonstrate the relative value of our data. It’s the bedrock of today’s services-driven tech landscape. Alphabet and Meta depend on us for their very existence. So then, this begs the $1 trillion dollar question: Why aren’t consumers getting paid?

DATA-AS-A-COMMODITY: AN OLD PROBLEM

I’m not the first person to sing this song. Over the years, we’ve seen a myriad of companies try to upend the existing relationship between consumers and tech companies by offering to compensate them—often monetarily—for their data.

A great example is the Brave web browser. Founded by Netscape creator Brendan Eich, Brave automatically disables third-party advertisements and trackers by default. Users can opt-in to see ads, for which they receive a small amount of cryptocurrency in exchange.

Brave gives 70 percent of its ad revenue to its users, while keeping the remaining 30 percent for itself. Although generous, this seldom translates into a meaningful payoff for consumers. Brave ads are fewer in number. Furthermore, the BAT token used to compensate users has lost much of its value over the past year, declining from a high of $1.36 to $0.23 at the time of writing.

Moreover, Brave has yet to achieve any real critical mass. The most recent browser market share figures puts Brave’s hold of the market at 0.05 percent. Google Chrome, by contrast, dominates with a 77.05 percent market share. Consumers, it seems, are yet to be convinced.

Another take on the problem comes from Pogo. This app, which has raised $14.8 million at the time of writing, promises to help users save money on their everyday purchases, while also providing an avenue for individuals to sell their data to third-party companies.

It’s too early to measure Pogo’s success. The company is very young. But there are obvious limitations to their method. Although Pogo provides a marketplace, it doesn’t empower customers to package their data and transact beyond the confines of its own walled garden.

A DIFFERENT TYPE OF COMMODITY

Likewise, there’s seemingly another strand conspicuously absent from the whole “data is the new oil” argument. Namely, it doesn’t act like any other commodity. Saudi Aramco, the Arabian Gulf’s biggest oil producer, knows what’s under the ground. Its payroll includes thousands of geologists and chemists. Their job is to identify potential new sources and measure the quality of the “black gold” pouring from the earth’s substrate.

By contrast, your data is mercurial. Despite the token attempts at transparency offered by Meta and Google, you don’t really know what these companies hold on you. Nor, for that matter, do you know which companies actually possess data about you. For every household name tech brand you knowingly interact with, there are hundreds more that exist in the shadows.

You don’t really know what your data consists of. For all but a few adtech industry insiders, how the sausage of targeting gets made is a constant mystery. You don’t know the telemetry that informs every profiling and targeting decision.

And so, any discussion of users monetizing their own data feels premature. It’s an endgame. We have to cross many bridges before we reach that point. And our journey must start with education.

If consumers are to profit from—or, at the very least, attempt to control—their data, they first need to understand it. They need to know who collects it, who uses it, and what it contains. Education is a must—and it must start early.

Suffice to say, today’s generation is the Adtech Generation. It’s an incredibly bleak thought, but it’s true.

The profiling begins from the age of 13, when most online platforms allow users to create an account. By the time they reach adulthood, the technology and advertising industry hold expansive dossiers on their interests and preferences. In many respects, these companies have a more intimate understanding of these younger users than their own parents.

KNOWLEDGE IS POWER

When consumers are armed with even the most foundational understanding of their data, they are empowered to take control. They can make demands of the technology and advertising companies that dominate our online lives. We can redress a long-standing power imbalance between individuals and today’s data-hungry businesses.

Knowledge is the first step to control. And with that, we can start to do some really interesting stuff.

It’s not impossible to imagine how these newly empowered consumers will start to demand a level of transparency with respect to their data, as well as control over its lifecycle.

Data will become a true commodity. Controllable. Understandable. Something that, like a tanker of oil, can be packaged and traded. For the first time ever, consumers will be able to understand the monetary value of their personal data.

And, keeping with the oil metaphor, data will be something that consumers can customize to meet their own needs. Just like oil becomes petrol and kerosene through the process of cracking, individuals will have the power to control what they share with third parties.

This isn’t a zero-sum proposition. While this model of data empowerment may limit the overall power of the tech and advertising industry, it also presents new and exciting opportunities.

First, the obvious: We’ll need a tech stack to facilitate this new frontier of data commerce. Somebody will have to build the tools necessary to aggregate, package, and exchange consumer data.

For technology and advertisers, making the exchange of data more transparent and forthright will eliminate the guesswork involved in targeting.

Consumers will, for the first time, have a genuine incentive to provide an accurate reflection of their interests and behaviors. Rather than serve content based on an inferred understanding of a person, which is often cobbled together from a patchwork of third-party adtech providers, they could just simply pay someone to hand over their browser activity.

From this, tech companies will be able to craft customized experiences that closely align with their users’ interests and preferences.

A NEW INTERNET

The prospect of an internet that’s forthright, honest, and profoundly customized is an exciting one.

And in some ways, it also feels inevitable. The tides are turning against the current data-hungry economy. Consumers and regulators alike are frustrated with the tech industry’s blatant disregard for user privacy. From Washington to Brussels, we’re starting to see the seeds of government action.

Some of the biggest pushback has come from within the tech industry itself. Apple’s App Tracking Transparency feature, introduced in iOS 15, is expected to cost Facebook as much as $13 billion in 2022 alone. Alphabet is set to deprecate the tracking cookie in 2024, with consumers grouped into deanonymized cohorts.

At this pivotal stage, the technology and advertising industries have two options. They can continue down the current path, which promises leaner years as targeting methods become gradually less effective.

Or, they can work with consumers. That means compensating people fairly for their data. It means embracing a radical level of transparency. And it means rewriting the incumbent business model of the internet.

But it also provides opportunities. It would be a mistake to let them pass by.

BEYOND MONEY

Admittedly, the business models of early-stage technology companies may not permit the kind of revenue-sharing envisioned by this post.  If you’re a bootstrapped business where every cent of budget is accounted for, or singularly focused on exponential growth, you may not be able to pay users for their contribution.

But that doesn’t mean that consumers shouldn’t benefit from your success. There are other ways to show your appreciation than a simple wire transfer.

Rather than merely give them a service—like Facebook provides a tool for social networking—you could consider providing a unique, one-off experience or incentive; something that’s not merely memorable, but also vindicates your customers’ decision to stick with you; and, crucially, something that promises to improve with further participation.

We’ve already seen this in the metaverse world. Think Epic Games bringing a Travis Scott concert to Fortnite. This is a great example of a unique event that rewarded the loyal players of a freemium title, and has since been followed by other notable names from the world of music, like Ariana Grande and Marshmello.

At the end of the day, if data is the new oil, it’s these types of authentic exchanges that will drive its value for years to come.

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ABOUT THE AUTHOR

Josh Rush is the CEO of Surreal Events, a virtual events and metaverse development platform. More

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