There were a number of reactions and comments to my post Are you a sensor on the Internet of things?, but one of them especially got me thinking:
davidhabben: We have the sharing economy, and now the #IOT #bigdata economy, notes @ydemontcheuil. Will users get paid?
How do you pay for a free service?
A basic economic principle says that, in order to obtain a service (or a good), you have to pay for that service (or good). If you don’t pay with hard currency, the opportunity of barter still exists: you pay for the service/good with another service or good, comparably worth to the counterpart you are trading with.
But what when the service is advertised as free -- as in a free mailbox, free disk storage space, free weather or traffic information? What is the form of payment? It’s not hard currency, since the cost is zero. Then it has to be barter.
The way you pay for a free service is quite simple: you relinquish a certain amount of your privacy, of your personal information, to the service provider. For example, you let Google or Yahoo! find out enough about you that they can sell targeted ads they’ll show next to your inbox or weather forecast. Or you fill out a form with sufficiently detailed demographic information that Dropbox will be able to more efficiently market to you their paid services.
This was the founding principle of the "free" Internet. Barter yourself for a service: you are the product.
Now, you are the one paying...
Along came the Internet of things. You are no longer getting free access to a service: you are actually paying for the privilege to use a fitness tracker, a bi-directional GPS, or a plant monitor. Of course, paying now makes sense to you, since you are "buying" a physical, tangible object that obviously costs money to manufacture and ship. And because the connected object vendor is so generous, they are actually giving you free access to great apps that show and analyze your data, send you alerts and notifications, and more.
But how altruist is this business model, really? You just paid for the privilege to become a sensor of the Internet of things. Clearly, you are getting value from the data you collect, or you wouldn’t play along. But the service providers are getting ten times, a thousand times more value than you do. By aggregating data from all these sensors, using powerful big data algorithms, they are compiling incredibly valuable insight that they can (and do) monetize. They story of how satnav provider TomTom is selling traffic data to authorities has now become a classic business school case study.
Wait, they used to pay you!
Once upon a time, in a not-so-distant past, TV rating companies would pay you to report hour-by-hour which TV program you were watching. Now, your cable company is collecting this info for free from your cabletop box -- while you are paying for cable service.
Once upon a time, air quality sensors were installed on rented windowsills or on a few square feet in private backyards. Now, you are buying a plant monitor, and measuring air quality -- for free.
Why this shift? Because the "old" service did not bring you any direct value, so you would only do it for money.
But the new service is also valuable for you. And you are willing to pay for it. So why would they pay you?
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