Financial Analyst Says Most Consumers Don't Realize How Their Data Is Used
AUDIE CORNISH, HOST:
Facebook chief Mark Zuckerberg met with lawmakers today ahead of two congressional hearings focused on what Facebook does with users' personal information. This comes as Facebook notifies up to 87 million people that their data got into the hands of the political firm Cambridge Analytica. But data sharing is at the core of Facebook's business model. So is that about to change? We take a look on this week's All Tech Considered.
(SOUNDBITE OF ULRICH SCHNAUSS' "NOTHING HAPPENS IN JUNE")
CORNISH: For perspective, we reached financial analyst Brian Wieser of the research firm Pivotal. Welcome to the program.
BRIAN WIESER: Thanks for having me.
CORNISH: So answer that question. Just how critical has Facebook's ability to share data on users been to the company's business model?
WIESER: Facebook makes great pains to say that consumer data is not sold to advertisers. And while that's technically true, without the data they wouldn't have a differentiated advertising product.
CORNISH: And it's not just Facebook, right? I mean, this is the underpinning for other tech companies?
WIESER: It's true. You can argue that the original sin of digital advertising is the use of data and highly targeted advertising. Most consumers are completely unaware of how data is used. And arguably, the entire digital advertising industry should have been doing a better job over the last two decades explaining to make sure that they actually had consent to use data in that manner.
CORNISH: Now, your clients are actually tech investors. How have they been reacting to this controversy? Are they nervous?
WIESER: Well, you know, some are. I think that it's safe to say that most investors are looking at this as a temporary setback. They're willfully optimistic, if you will, that the company will get through this because right now what we're hearing from advertisers is that advertisers aren't all of a sudden changing how they're making allocations of their budgets.
CORNISH: The European Union is implementing regulations next month around how a user's data is used, who owns it. Every company that has users in Europe has to comply. How is that going to affect how Facebook operates?
WIESER: Tighter rules on how a company like Facebook and marketers can use data will make it harder for them to realize as much revenue as they have historically. That said, Facebook and Google as the two dominant players might be better positioned than many of the smaller companies in the industry. So paradoxically, they could actually end up growing their share of the market even if the market doesn't grow as much as it used to.
CORNISH: Is Europe doing something that could bleed over to how regulators think in the U.S.?
WIESER: The principle in Europe is that data belongs to the consumer. And I think that we'll need to see more go wrong in the United States before politicians and regulators will create new legislation.
CORNISH: So as far as advertisers, app developers, they're not exactly shaking in their boots yet.
WIESER: They're not shaking in their boots yet.
CORNISH: I want to get your take on another way Facebook could change because last week, Facebook COO Sheryl Sandberg was on NBC. Here she is talking with Savannah Guthrie.
(SOUNDBITE OF TV SHOW, "TODAY")
SAVANNAH GUTHRIE: Could you come up with a tool that said, I do not want Facebook to use my personal profile data to target me for advertising? Could you have an opt-out button? Please don't use my profile data for advertising.
SHERYL SANDBERG: We have different forms of opt-out. We don't have an opt-out at the highest level. That would be a paid product.
CORNISH: Brian, what do you think? Is it out of the question for Facebook to charge users a subscription fee instead of just sharing their data with advertisers and others?
WIESER: It's certainly possible that Facebook could implement some sort of user fee or give that alternative to consumers, but it seems like a very different business for Facebook to be in. You know, it seems more likely that they might implement a business where maybe less of your data is shared or you actually have to give more consent to use more data, as would be the case under this new European data law where you have to actually opt in. It's not about opting out. You have to opt in to doing so. It's a less lucrative business for Facebook, but it might be the more durable one.
CORNISH: Brian Wieser is a senior analyst at Pivotal Research Group. He covers, quote, "all things advertising." Thanks so much, Brian.
WIESER: Thanks very much for having me.
(SOUNDBITE OF MUSIC)
NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.