BusinessDay 12 Apr 2018

Thursday 12 April 2018
BUSINESS DAY
29
Harvard
Business
Review
Global Business Perspectives
CONNECTING THE WORLD ONE BUSINESS AT A TIME
Data for Sale
SUSAN FROETSCHEL
EAST LANSING, Michigan
— The scandal
involving Facebook
and data-mining
company Cambridge
Analytica dramatically confirms
the adage of no free lunch.
Facebook’s more than 2 billion
users are waking up to the fact
that the “free” online site extracted
a stiff price: personal
data.
News reports that Cambridge
Analytica swept up details
on millions of Facebook
users — then used details for
targeted political advertising
in many countries — jolted the
industry, regulators and users.
Yet users consented to data exchanges
without reading pages
of small print of terms of service
agreements. Many companies
profit handsomely from knowing
the details of users’ phone
calls, driving patterns, family
history, credit card purchases
and more.
Of course, Facebook is not
alone. Big-data analysis is big
business. Companies continue
to discover new value in crossindustry
exchanges, combining
forces to monetize data sets to
improve services, reduce fraud,
attract new customers or meet
regulatory requirements. Cambridge
Analytica is not alone
either. In China, the Shanghai
Data Exchange, started in 2017,
offers a platform for trading all
types of consumer information
gathered from telecommunications,
credit cards and more
with the aim of drawing technology
firms to the city.
Collecting data to assess target
groups is not new. Decades
ago, telemarketing firms relied
on typists to go through phone
books, cross-listing names and
numbers with other public lists.
The college application process
has long been a data-mining exercise
to determine which applicants
are likely to enroll and
graduate.
Patients, borrowers, students
Mark Zuckerberg, the chief executive of Facebook, speaks at a conference in San
Jose, Calif., April 18, 2017. Addressing for the first time the growing data privacy
scandal, Zuckerberg outlined several steps the company was taking to address the
issue on March 21, 2018. “We also made mistakes, there’s more to do, and we need
to step up and do it,” he wrote in a post. (CREDIT: Jim Wilson/The New York Times)
who fill out offline application
forms are not exempt from becoming
targets. Paper forms are
quickly scanned into computer
files. Large community events
and fairs offer opportunities
for data gathering. Hundreds of
vendors attending large home
shows hold contests to gather
potential customer contacts.
Computers made data collection
easy. Any type of data
can be packaged and marketed.
Cities already provide data on
properties, taxes and public
health as a public service. To
improve efficiency, utilities in
India, Europe and the United
States rely on smart meters to
monitor and predict patterns of
energy and water use. Committees
and policies for monitoring
data use and information governance
so far are not keeping
up with the growing numbers
of organizations gathering and
trading data.
Data products can be specific,
offering details about individuals,
or aggregated to relay
broad trends. Laws in the United
States and Europe protect individual
health, education or financial
information, but do not
ban aggregation as described in
privacy policies, terms of agreement
and license agreements.
Health is an especially sensitive
area, and privacy laws, even
the strict new data protections
to be imposed by the European
Union in May, include exceptions.
The EU law requires that
patient data “be collected for
a specific explicit and legitimate
purpose” but allows that
same data to “be reused for research”
for the public interest
purpose of driving innovative
treatments. The same law limits
how long patient data can
be stored, “except for archiving
and scientific research purposes.”
Explicit patient consent is
not required as long Financial
firms collaborate on data collection
to avoid risks. Insurers
form special units for collecting
drivers’ data. Digital strategies
fuel growth, explains Boston
Consulting Group. Companies
combine online business processes
with communications
and services to gather data.
App developers respond with
entertaining quizzes, surveys
and games designed to entice
consumers to hand over more
data. The harvest of Facebook
profiles began with a small personality
test, fewer than 300,000
users took part for a tiny sum,
and in the process millions of
friends got dragged into the net.
Less than 20% of third-party
app developers for Facebook’s
platform are based in the United
States. Developers like Elitech
in India provide customdesigned
applications or games
that assess target audiences and
prioritize user engagement.
Developers can use games to
assess user performance and
personality with small tasks
from placing an order to solving
problems. Facebook encourages
developers around the world
to develop local apps that will
lead to more local users.
Asia leads the world with
more than 30% of 20 million
app developers while Europe
and North America each have
about 30%. Economic Times reports
that India leads the world
in Facebook users and has the
second largest base of Facebook
developers. Developers
and social media firms worry
about new regulations disrupting
the growing industry. Apps
and games available from Apple’s
iTunes Store went from a
few hundred in 2009 to more
than 3 million in 2017, with
downloads in the billions.
Apps take advantage of the
universal desires to play, un-
derstand ourselves, or compare
how we perform with others.
Experts analyze user choices,
associating interests as detected
by searches and clicks with
individual behavior, hunting for
patterns and correlations. Some
companies offer discounts to
customers deemed as reliable
or creditworthy; other firms
hunt for gullible, impulsive
spenders.
Unorganized data may seem
worthless, and Facebook and
countless others readily opened
the gates to app developers and
advertisers with little attention
to the ultimate goals behind
data transfers. Soon after news
emerged about Cambridge Analytica’s
use of Facebook profiles,
Mark Zuckerberg issued
an apology, admitting that even
social media executives had
not realized the full potential of
their platforms and how many
insights might be gleaned.
He admitted not imagining in
launching Facebook in 2004
that the site could be accused of
changing the course of an election.
His strategy is for communities
to decide their values and
rules for Facebook.
Users have a choice on what
to share and with whom. Like it
or not, big-data analysis influences
communities and workplaces,
and users have a responsibility
to read lengthy policies
with care. A lesson emerging
from the Cambridge Analytica
and Facebook debacle is that
those who refuse to surrender
data cannot evade the consequences
especially when so
many other users do share. Millions
of friends whose data was
harvested may not have given
specific consent, but in the end
that did not matter.
(Susan Froetschel is editor of
YaleGlobal Online and the author
of five novels including
“Fear of Beauty” and “Allure of
Deceit,” both set in Afghanistan.)
2017 Harvard Business School Publishing Corp. Distributed by The New York Times Syndicate