Is Data Licensing the Key to the Privacy-Personalization Paradox?by@shanefaria

Is Data Licensing the Key to the Privacy-Personalization Paradox?

by Shane FariaJune 14th, 2023
Read on Terminal Reader
Read this story w/o Javascript
tldt arrow

Too Long; Didn't Read

Consumers want personalization AND they want privacy. But they're still willing to share data for personalized experiences, perks, deals, and benefits. As data becomes viewed as an asset by consumers and privacy policies, laws, and regulations become more prominent, we risk throwing the baby out with the bathwater without a logical and efficient way to exchange data between businesses and consumers. Data licenses may provide a solution.
featured image - Is Data Licensing the Key to the Privacy-Personalization Paradox?
Shane Faria HackerNoon profile picture

Privacy at All Costs? Not So Fast.

In the consumer world, two seemingly competing desires have manifested: an increased desire for privacy and personalization.

Historically, the two have been difficult to achieve simultaneously. The idea of data being valuable to a consumer is a relatively new one. Data has traditionally been one-sided toward businesses, and with the average consumer uninformed about what happens with their online data, it was scraped, packaged, and sold across the world. Most things we have grown to despise about the internet have roots in data misuse: predatory and creepy marketing and advertising, data breaches, confusing and misleading terms of service agreements, and dark patterns, just to name a few.

It is abundantly clear that consumers want more privacy and control when it comes to their data.86% felt growing concerns about data privacy, and 78% were concerned about the amount of data collected. They aren't necessarily sure how to act on those desires, but the desire remains.

But, this is not a "throw the baby out with the bath water" scenario. We risk tossing out the baby without an easy way to transact data from user to business. The desire for privacy is not synonymous with keeping personal data away from companies at all costs. Quite the opposite. Consumers want to share data with businesses so long as something of value is given in return. Consumers want personalized experiences. Customers want to be delighted by the brands they engage with. They just don't want to get screwed over in the process and don't want to give up more than required.

People Prefer Personalized Experiences in the Privacy Era

In 2018, Accenture released a study revealing that 83% of consumers would exchange data for a more personalized experience. This statistic has varied quite a bit over the years through many studies, ranging between 65-85% in my research. I'll often cite a variation of this stat, but admittedly it is a bit misleading. Accenture's 83% does not consider the type of data people are willing to exchange, just that they'd be willing to trade some kind of data.

A 2021 Statista survey paints a more accurate picture. In the US, 75% would share their email address, 65% their name, 65% interests relevant to the brand, and 56% what they've browsed on a brand's site or app (first-party data). More than half of the surveyed would share things like address, phone number (for texts), and demographics. Even in-store location checks in at 50%. It doesn't sink below 50% until we get into more sensitive information, like social and moral values (45%), securely stored payment info (41%), real-world location (36%), and what they've browsed on unrelated sites and apps (33%). Even with growing concerns about data privacy, consumers are willing to share data. Heck, a third of them are eager to let you know exactly where they're at.

We're living through the Privacy Era (or some version of it), with the implementation of Apple iOS 14.5 and ATT (App Tracking Transparency), GDPR, CCPA, and other privacy-protecting laws and regulations, and Google's long-teased phase-out of third-party cookies in 2023. Businesses have been scrambling ever since, working with new challenges while third-party cookies are still acquirable. And at the same time adopting new methods of first- zero- and second-party (via strategic partnerships) data collection. All of this is happening while the desire for personalization has increased.

Between 2017 and 2021, the likelihood of a consumer becoming a repeat buyer has increased from 44% to 60%, according toTwilio. The same study shows a gigantic gap in perceived personalization—85% of businesses believe they're offering personalized experiences, yet only 60% of consumers believe that is the case. Without personalization, 45% of consumers would do business elsewhere. But most consumers only want personalization, a product of data shared directly with a business (69%).

I know that's a ton of statistics, but I hope it gets the point across. Two paths (privacy and personalization) diverged in a yellow wood. Consumers are adamant about choosing both of them. Privacy initiatives that place more control of personal data in the hands of the consumer have turned data from an asset to be collected by businesses into a bartering chip to be traded from consumers to companies. But only if the price is right.

Data is Oil, Currency…Whatever. Data is an Asset

Everyone is sick of hearing that data is the new oil. Even though it holds weight as a comparison in many regards, it's played out, and unless you delve into the details, the phrase doesn't paint the picture of what happening with data. Plus, most people need help understanding what was meant when the phrase was first uttered.

Yes, data fuels lots of things, like oil. Yes, data needs to be "refined and processed" before it is turned into something useful. That element in the data-oil comparison will not change for the foreseeable future. But this data-oil talk predominantly centers around the oil consumers--the refiners, the processors, those taking data and using it to power internal systems to create more valuable products and services. Much less common is the perspective of the average person.

From the perspective of a consumer, "oil" is irrelevant. It doesn't matter what you want to compare it to. People are increasingly aware that their data is a valuableasset. With that acknowledgment, all those folks hyping up data's soaring value are now forced to reconcile with the fact that the consumer also knows how valuable data is. This has ushered in an extension of the data-oil comparison: data as currency. Whether or not that is accurate is another story, but what the comparison gets right is that data is something to be exchanged. But how do we address how data is exchanged between users and businesses in an increasingly privacy-centric era? To ensure trust and compliance, we need some rules. And what do we need when we have rules and restrictions for using something? Enter the license.

Licensing Data—Addressing Privacy, Personalization (and much more)

Here's the author and credentials plug—I've been working since late 2020 (formally) trying to solve this privacy-personalization conundrum in the form of a platform that allows for licensing, exchanging, and monetizing zero-party data.

While thetech may be complicated to some (it's pretty sleek to us), the reasoning behind a data "license" was quite simple. People want more control over their data, and what better way to do so than by giving them ownership?

Ownership over an asset they choose to share or not share depends on many factors, such as the business or entity they're interacting with, the use cases and limitations of the data, and what the consumer receives in return for exchanging their asset. The same way an artist would license a song (sure, indie film, I made this song along with my bandmates, you can use it for xyz but not abc, for 2 years, here's how the payout structure looks, here's what happens if you violate the contract, etc.), a consumer should be able to license data.

From a business perspective, take the software I'm using to write this—Microsoft Word. I paid Microsoft money, and they licensed me Microsoft Word. The license specifies the permitted use of the software, the number of installs per license, prohibits copying and modification, the terms for when Microsoft can terminate the license, and more.

Looking back at the2021 Statista survey, we see that privacy is not binary. It exists on a spectrum. People from different places will exchange different types of information for various purposes. While cookie banners have implemented a filtering system for the types of data allowed to be shared, and lawyers would argue that terms of service agreements and privacy policies to which consumers agreed to explicitly state the parameters of data collection and use, these methods are obviously suboptimal and cater to the desires of businesses rather than consumers. Cookie banner opt-ins are low. Most people don't read privacy policies or terms of service agreements (and who can blame them?)

The data license deals consumers into the equation in a way that makes sense to them, isn't invasive, and, most importantly, sets the terms for what they receive in return. Instead of a binary yes/no data exchange, businesses can offer specific terms, users can agree to some, none, or all, and businesses can counter with different terms if they so choose. Do you want to use consumer data for personalization purposes but want to ensure you won't go off and sell the data to someone else? With a data license, you can do that. Want to offer them cash-back in exchange for re-selling data (anonymous or not) on secondary marketplaces? You can do that too. Loyalty points in exchange for sharing IDFA for attribution? That, too.

A license provides the flexibility to adapt to the privacy spectrum of the consumer while providing a business with an economic understanding of the value consumer places on their data and, therefore, their privacy. Equipped with data sourced directly (and consensually) from the customer, the path to personalization, customization, loyalty, and more is paved. The customer has told you exactly what they want.

Personalization, Loyalty, and More

As we know, more consumers view data as an asset. They are wary about their digital privacy but still want personalized experiences. They're more likely to be a repeat customer if their experiences are personalized. In other words, they're more likely to be loyal. Personalization in tandem with loyalty efforts is a powerful combination. Loyalty rewards and points are mentioned most frequently as the things that delight customers most about their brand experiences. This is followed by discounts and coupons, specifically on their favorite categories. A brand understanding of a consumer's needs also makes the list, as well as notifications on favorite items coming back into stock and, of course, the overall customer experience.

Personalization plays a significant part in all these methods of delight (excellent band name), from the specificity of coupons to an understanding of a customer's favorite products and product categories. Personalization and loyalty go hand in hand; both are powered by relevant consumer data. There are mountains of studies out there on loyalty and personalization, painting the same picture.

Most of these studies need to address the method of transacting data between customers and businesses. The appropriate transfer mechanism can be adopted by viewing data as what it truly is, a transferrable asset with ownership functionality. I consider this mechanism to be the data license, though it could take other forms. The fact remains that whatever the adopted transactional method may be, it needs to account for the privacy spectrum—what a consumer would give up based on what they receive in return.

Privacy and personalization are not mutually exclusive. Without the appropriate amount of both, consumers are voting with their feet.