Commercial aspects from privacy research

I was reading recently a book "Internet policy and Economics", this book contains an essay, 7th Chapter, which comes from a Berkley professor, H. R. Varian (who is currently chief economist of Google)

He presents an economics solution to the privacy problem. The idea or concept is simple, let people trade(lease) their private data but not third parties (which is the current scenario). So, there must be a legitimate organization which let people buy others data and let people sell their data. (I think that it will kill majority of spammers and other people involved in identity theft business)

If you will read the chapter (which is quick and easy read) , you will find that the idea was first described by Laudon in 1996 (landmark paper: http://portal.acm.org/citation.cfm?id=234476 ). Laudon proposed this idea in firstplace proposing a National Information Market.

I am part of a social media platform project known as OtaSizzle, and I am researching the privacy area in the platform. To me connecting the dots from the book and the project, points out an obvious demand coming out for a service, which sets up the market place for anonymous trade of user information. Where the users data is collected at one place and is transparent to Users, about what is being collected and setting up of a market place where buyers can bid for user data.

For example: The obvious customers in Finland or elsewhere would be the retailers/marketers to send directed/personalized advertisement, not SPAM! So, service could provide a mailing list to retailers for their target audience, which do not show them who is subscribing to them but they know how many subscribers are there. They have to pay service provider a fee to post to the mailing list. A part of which is passed on to the users who have opted into disclosing their data to the marketplace (service provider) to enable this kind of transaction possible.

For example: All the users who are part of group Apple :Mac Products, might be of interest to MacStore for infroming of new available discounts. MacStore has to pay to post to users, earnings would be shared with users. So, the users are involved directly in value chain. Also, their data does not go into hands of people they do not want (which, is the current case)

So users get paid for participating in the service and also reduce their transaction cost. This is similar to loyalty cards but linked to the online activity.

In past many companies have been created, which makes spyware/adware but does not include user in the value chain. One such example is Double Click, which was recently bought by Google for ~3 billion dollars. Also, in many cases such companies can be accused of being illegal.

I see this as a radical change (if we can do it or somebody else). That instead of trapping users in EULA's we let users decide whom they want to sell and at what price their own data.

Many people who will read this piece, will obviously criticize it for:

The concept has been around for quite sometime (since 1996), why there is no such service?

I would say that we have it indirectly when the essay comes from the chief economist of Google,Google must be one to do it. Google is the one obvious implementer of this concept. They have shifted the cost of services like Gmail etc to advertising. People could control to a little extent what Google stores about them and Google has created a market place for advertisers where they bid for advertising to users, without knowing the users.

However, I would say even though Google has created the marketplace from advertisers point of view but a more choiceful market from users point of view does not exist. Users get control of their data but they still have to rely on the price set by Google not market place (maybe indirectly through competition with MSFT or YAHOO, features and storage space). They get free services and nothing else. They are part of value chain but they must get more, after all it is their data, which gives Google record profit !

Also, last but not least Google has created a market place for web for the advertisers but still their user side is not touching everybody in everyform. (Search and other services are quite widespread but still there is a scope).

I would say an independent service would be more suitable which could sit on your "machine /browser" in form of a " browser plugin/desktop client/cloud service " which eats all your usage data across the services (Facebook, Google, MSFT etc) and then users choose whom to share with their data and at what price.

Last but not least, living in Finland, I must relate it to Nokia too! With the recent announcement of Nokia Money Service, I see an amazing opportunity for an ecosystem to be created on top of this payment service. Where users can opt in for a similar version of mobile service/software which can help them trade their usage data with retailers. My guess is Nokia must be very happy to work with such a startup, as it will bring down the transaction cost of users using Nokia Money, by bringing better targetted discounts/offers.

For those who like this idea, I would appreciate comments/suggestions. Or if somebody wants to take the concept for a startup that would be even better!