THE BLOG
01/20/2013 07:57 pm ET | Updated Mar 22, 2013

It's Not How Much Data You Have, But How You Use It

Over the past few years, leading technology companies such as Amazon, Apple, Facebook, Google and Microsoft have extended their services to touch every bit of our digital lives. Companies previously known for one or two technologies have now branched into mobile devices, operating systems, browsers, gaming platforms, email and messaging services, search engines, storage facilities, social networks, ad networks and more. These new services and uses of data have been the cause for privacy alarms, which are typically touched off when companies adjust their policies to enhance data sharing and integration.

Yet companies continue to innovate, expand and integrate. They must, for a consumer business without integrated solutions in today's world risks becoming marginalized by competitors and losing access to consumers. Consider Amazon, which launched the Kindle as its own e-reader despite incurring steep costs to ensure that readers of e-books had easy access to the Amazon store. The Kindle now provides Amazon with an all-important direct channel to its mobile consumers, avoiding the obligation to pay Apple or Google 30% of sales made through the Amazon app on the iPhone or Android devices. Apple's recent decision to replace Google Maps with its own service and eliminate the pre-installed YouTube app further reinforces the value of Google's Android alternative.

Should companies that have many services be held to a higher standard because of how much data they have?

During a workshop hosted by the Federal Trade Commission, which explored the practices and privacy implications of comprehensive data collection, panelists discussed the multiple touch points that these services can cover across a wide range of activities. Privacy advocates argued that too much can be inferred about a person due to the rich profile behavior built off a user's interactions with a company's integrated services. They were concerned about the imbalance of power that could result when companies know consumers better than they know themselves, or the effects on free expression when searches and reading habits are tracked. Others worried that giant troves of information heightened the dangers of data breaches.

Given these risks, but also the clear consumer demand for services that are interoperable, how should policymakers think about privacy in this new world?

As pointed out in the workshop, the key is a focus on respect for context. Under the contextual approach, a privacy concept first proposed by NYU Professor Helen Nissenbaum, data use practices are not evaluated in a vacuum. Rather it is the context of a transaction or relationship, as shaped by consumer expectations, that legitimizes data use. A new Future of Privacy Forum white paper argues that crude criteria such as the size of a company, the number of consumers or the breadth of data under its control are not dispositive. Instead, through clear communication of data policies including any purported changes, a company can help shift consumer expectations to align them with prospective data use.

It can become tricky when the solution involves truly innovative data practices, which, by definition, cannot be anticipated by consumers. For example, if Facebook had not proactively launched its News Feed feature in 2006 and had instead solicited users' opt-in consent, we might not have benefitted from Facebook as we know it today. It is only when data started flowing that users became accustomed to the change, which is viewed today as an indispensable service by more than a billion users worldwide.

In turn, companies can build their relationships and expand the context of their data practices through wise brand management. Consumers will accept new data uses that flow naturally from extension of a recognized brand. For example, a consumer's sneakers are not ordinarily expected to communicate with the consumer's phone, but if Nike sold a Nike branded smartphone consumers would likely expect that it seamlessly communicates with their bluetooth-enabled Nike shoes.

Respecting context and ensuring that companies successfully bring users along when they change data use policies presents significant challenges in our networked world. However, if data innovations surprise consumers or lead to our data being used against us, the result will be a backlash that is likely to stymie the development of new services and products. Let's innovate around data use as long as we remember to bring our customers along.


Jules Polonetsky is the Director and Co-chair of the Future of Privacy Forum, a Washington, D.C.-based think tank that seeks to advance responsible data practices. He formerly served as AOL's Chief Privacy Officer and SVP for Consumer Advocacy.

Christopher Wolf is the Co-chair of the Future of Privacy Forum. He is also a partner in the Washington, DC office of Hogan Lovells LLP, where he is a leader of that firm's privacy practice group.