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Feb 06

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Why You Don’t Really “Pay” $5,000 to Use Google

Google’s new privacy policy, which comes into effect in March and consolidates the company’s 70+ existing policies into one, raises new concerns that the search engine giant retains the right to collect and use information about its users. Advocates for online privacy rightfully point out that this information is highly valuable to advertisers hoping to target marketing campaigns more effectively. One Smart Money article goes so far as to say that Google users, “fork over $5,000 worth of personal information to Google in exchange for access to its ‘free services’ such as Gmail and search.”

The article estimates the yearly value of personal information using “new research,” which apparently only amounts to a single quote from the CEO of Reputation.com claiming that “personal information can be worth between $50 and $5,000 per person per year to advertisers and market researchers…” Ignoring the reliability (or lack thereof) of the source, we are left pondering whether naïve Googling, Gmailing, YouTube-watching, Google Mapping users really “fork over” any assets in return for Google’s services? Put differently, when you use Google and thereby provide your personal information, is it equivalent to selling one of your assets like your car for example?

No, it isn’t the same for several reasons.

First, if you choose to give away your information, you haven’t lost $5,000. This is because you cannot easily sell that information instead of giving it to Google. Advertisers and market researchers won’t usually buy information directly from you and all the other millions of consumers because the transaction costs in doing so can be prohibitively costly. Indeed, Google’s great success is due in large part to its cheap and relatively unobtrusive way of gathering and using information. Additionally, your individual information is worth much more when combined with massive data sets of other people’s information, which reveal macro trends that advertisers care about.

Second, just because advertisers value your personal information highly, doesn’t necessarily mean you value hiding it just as much. Because I don’t value information on my basic demographics and buying habits very highly, I’m happy to provide access to in return for Google’s many services. As an analogy, when I put an old sofa on the sidewalk with a “Free” sign on it, I am confident that my trash is someone else’s treasure. When someone actually picks up the sofa, I’m not poorer as a result. The same can be true for personal information.

Third, giving away personal information isn’t like giving away money or some other asset. By providing access to it, you not only still retain that information yourself, but you actually receive better service from the products you use. For example, when I shop on Amazon, I receive personalized product recommendations based on past browsing and purchasing, which I actually appreciate because I discover products of interest. I’ve had the same experience with ads on Facebook, which often provide content that I enjoy.

About the author

Benjamin Bohr

Benjamin is a manager at Fulcrum Financial Inquiry. He specializes in statistics and data analysis for use in high-stakes litigation, business valuations, and other financial matters.

Permanent link to this article: http://betweenthenumbers.net/2012/02/why-you-dont-really-pay-5000-to-use-google/

1 comment

  1. Daniel Nolte

    A lot of Facebook users are seeing the multibillion dollar IPO and are thinking “Hey, that value is coming from the stuff we gave them for free!”

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