When Facebook's much-vaunted IPO fell flat a couple weeks ago, conventional wisdom said the dot-commers' belief that almost any online business can make billions through advertising was not a realistic business model after all. Advertising fees online trail those of other media, and multiple studies show that when people are engaged in social networks, they tune out ads precisely because they are so focused on their interactions.
The conventional wisdom is right, but not complete. I believe that in the next two or three years, an even more fundamental assumption about these businesses will be turned on its head. Whether it's Facebook, Twitter, Google Drive, or Pinterest, the truth is the product is you -- all that data about you used to target ads and sales pitches. It's hardly a new business model -- it's how trade publications have made their money for decades -- but in the online world all that information is easily stolen, traded, and spread. Yes, I'm talking about the issue of Internet privacy, though Silicon Valley remains tone-deaf to the topic.
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You're giving away what's valuable about you
Right now, users give away valuable information about themselves. Sometimes they get something of real value in return, but most online businesses give away worthless "value" dressed up using gamification techniques. Klout, I'm looking at you.
As we see more data breaches and grosser levels of disrespect for user privacy, I suspect the public will start to realize they're being had. And as they've learned they can do in other venues, they'll take charge.
The pieces are out there to create a data brokerage that pays you
I fully expect to see services pop up that act as personal-data brokers, giving users a cut of the money made from their personal information -- the data users explicitly choose to share, not what is gathered about them sneakily. Again, this business model has long existed, but not in a way that allows individuals to participate in the proceeds.
Companies such as Amazon.com and Rakuten (better known by its LinkShare brand) already have similar businesses based on giving users a cut of sales from their product referrals. The tracking and payment platforms are in place, as are the reach and trust in Amazon's case. A company such as R.R. Donnelley, which handles about half the junk mail (postal and online) in the United States and microtargets it based on your available data, would be a natural in this business as well, though it would need to create a brand from cloth.
Apple's forthcoming Passbook service in iOS 6 could also be a foundation for your personal data portfolio -- imagine if Apple lets you use your iCloud or iTunes ID as a universal ID, tied into your payments and Passbook accounts. Apple's track record of empowering users over their personal data is better than most, and it has the reach to be a common ID/data vault, especially given how much personal data you aleady entrust to it via iTunes and iCloud.