The Hidden Cost of Free

This post was originally published in design mind on January 13, 2011. It was republished by Co.Design.

Problems With the Personal Data Economy

A few years ago, my friend Jeff was enjoying a celebratory dinner with his wife and parents at an Italian restaurant in Austin. The waiter stopped by to ask how everyone was enjoying their food.

“It’s fantastic,” Jeff reported. “These truffles? Seriously amazing.”

“Would you like a few more?” the waiter offered.

“Sure, why not?” he replied. A few moments later, the waiter brought back a few more truffles for the table. They were passed around the table and everyone agreed they were the highlight of the meal. Until the check arrived.

Truffles: $300.

Most people have been in situations like this before. Who is to blame? Jeff partially blames himself. He should have asked the waiter about the price. On the other hand, Jeff probably trusted the waiter to let him know about a charge of that magnitude.

This anecdote illuminates the essence of the problem with the personal data economy. Every day, hundreds of millions of Internet users take advantage of services that appear to be free: social networking sites, email, news sites, and even online dictionaries. But, of course, many of these services are not free at all. Users pay for them with their personal data, whether they know it or not. And at some point in time, the bill will come due. But, like Jeff’s truffles debacle, what remains unknown is the price.

Many people are not bothered by personal data tracking. After all, Internet users clearly benefit from free services like Gmail, Facebook, and Some argue that if the providers of these services take something in return, they are welcome to it. Moreover, if the result of this data sharing is targeted advertising, doesn’t everyone win? Isn’t relevant advertising better for both vendor and viewer? The certain honesty in this argument is appealing. What it ignores is the importance of transparent pricing.  Today’s economy of personal data is a priceless economy, which means that firms aren’t forced to compete based on the cost to users. How much of my data will you share and with how many parties? For how long will you share it? There are no market constraints on these matters, so there is no limit to what information is shared, stored and sold.

The second implication of a priceless economy is that consumers are running up a tab without a clue as to what the true cost will be. Will your personal browsing habits be made public and put your career at risk? Will data be accidentally shared and lead to identity theft? Or will you simply be subject to excessive amounts of spam? Each of these scenarios contains a cost, but today we lack any accounting method to meaningfully measure any of them.

At frog, we’ve been asking ourselves a lot of questions about personal data: How do people feel about being tracked? How can service providers approach data tracking in a user-centered way?  Are there business opportunities in helping users manage what information they’re sharing? What is this data worth, anyway?

In order to shed some light on these questions, frog hosted a daylong workshop in New York, in partnership with the World Economic Forum exploring user perspective on personal data. Leading up to the workshop we ran a frogMob —a visual guerilla research tool —that asked people who they trusted with their personal data and how it effects their daily interactions on the internet.  We’ve also undertaken a global survey of attitudes toward personal data, with the specific goal of trying to infer an actual financial value of various types of personal data. In the coming weeks, we’ll be using this blog to disclose some of the most interesting findings.

We hope this exercise will help illuminate how people will react when their personal data “bill” comes due. Will they have undervalued their data? Of course, if Jeff’s story is any indication of how people will feel, I’ll let you know how he handled it.

He sent back the bill.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s