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Privacy’s Tipping Point

The smartphone is the epicenter of our universe. It is always with us, keeping us in touch with friends and family, and is a security blanket of sorts, saving us from boredom, awkward moments, and getting lost. It seems every week there is another survey revealing just how attached we are to our smartphones.

But the smartphone is also a conduit for gathering our digital footprints. Apps have the ability to collect highly personal information, which they not only use to better target you with advertising and marketing messages, but also share with third party companies. All of this takes place seamlessly, without your explicit knowledge (though you may have agreed when you accepted the voluminous Terms of Use that no one actually reads).

Of course, nothing in life is free. We as consumers get to use some amazing technologies we couldn’t have even dreamed of a decade ago – all at no charge. Turn-by-turn directions, controlling our DVR from 100 miles away, highlights of last night’s game, and so forth, are provided to us by companies who need some sort of revenue stream. In most cases, the business model is built on advertising. We use their apps for free and in exchange they show us marketing messages.

In theory, the more these companies know about us, the more the advertising can be targeted to our interests, resulting in more relevant ads, increased clicks, and thus more revenue. After all, as a father of four living in the suburbs, a minivan ad (sadly) is much more likely to resonate than one for a Porsche 911.

For better or for worse, this is the marketplace we find ourselves in. Our browsing history and personal data all feed the advertising ecosystem that keeps our smartphones brimming with cool apps that we don’t have to pay for (or pay a minimal fee).

I completely understand how the advertising ecosystem demands an exchange of personal data in order to keep our favorite apps free. I get it. However, I merely wish we had a transparent and open system where users were notified what types of information is collected and how it will be used. Users can then decide whether they are receiving sufficient value for the service and are thus willing to share their personal information.

For example, Instagram recently announced a change to their privacy policy, allowing them to use your photos in advertising and other revenue generating activities. Whatever you think of the change itself, I applaud Instagram for publicity communicating the changes well in advance of the actual date. As it turns out, Instagram users mounted a highly vocal protest and the company eventually back tracked. Interestingly, alternative photo sharing services reported record number of users signing up for their services in the days following the announcement.

But that is my very point – let users decide! Companies should embrace honesty and straightforward communications. By doing otherwise, they risk destroying the trust of the very consumers they rely upon to generate revenue.

My hope is that in 2013, companies will embrace frank and forthright communication and provide consumers with a simple explanation of their intentions. Otherwise they risk losing the trust of their customers, and consumers will look for alternatives that treat them with respect and decency.

Allan Fromen is Vice President, Consulting, on GfK’s Financial Services team. He can be reached at allan.fromen@gfk.com.

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