Introduction

With rapid advancements in information communication and technology, more and more data is being generated. The essence of successful business strategies lies in the extraction of meaningful insights from customers’ data. These insights can not only provide customers with an immersive experience but also steer the enterprise towards securing a competitive advantage. In the realm of the tech industry, many enterprises are offering free service; the biggest use-cases can be search engines and social networking sites. One might wonder how come these businesses can generate billion dollars in revenue while offering free-of-cost value? The answer lies within a very simple fact that these tech giants record, store and monetize the personal data of users (with or without consent) to generate enormous revenues; essentially, “If it’s Free, Your Data is the Product”. Large tech enterprises are using “you” to generate incremental profits. Via taking the ownership of personal data, users can reduce the power of these tech firms and become more independent.

Scale & Scope of Social Networking Sites

The universe of the internet grows as more and more strata of the societies globally improve their access to information in general and the internet in particular. This improved internet access has paved the path for the exponential increase in smartphone penetration. As a result, the world has become more connected than ever via the platform of social networking sites. If one looks at the scale and scope of these social networks in general and mobile communication apps in particular, he will be surprised to know that their monthly revenue is much greater than the overall GDP of many countries. These social networking sites include Facebook, Instagram, Twitter, LinkedIn while communication apps entail WhatsApp and Facebook Messenger, etc. Another dimension of increased internet penetration is the use of search engines and associated products, which includes Google at the top of the list. Moving to the universe of smartphones, in addition, to the play store or Google Play apps, the operating systems of the smartphones i.e., android and iOS record a lot much user information.

If these organizations are seen from the lens of numbers, Google stands out in the league of tech giants with nearly 4 billion users (global internet users, according to Statista, are 4.39 billion). Moving towards the social networking sites, Facebook has 2.85 billion users worldwide, followed by YouTube (2.29 billion), WhatsApp (2 billion), and Instagram (1.3 billion). Although these numbers aren’t mutually exclusive, yet it gives a fair idea about the business operations and future of prospects of tech giants, given the evolution of 21st century.

What Information Do Tech Companies Record?

There are multiple facets according to which personal data of users is recorded: personal information, unique identifiers, activity, location, and publicly accessible sources. Major tech products are listed below as per the discussed metrics:

Personal Information

Table 1: Image Source

Unique Identifiers

Table 2: Image Source

Activity

Table 3: Image Source

Location

Table 4: Image Source

What is Data Monetization?

In simple words, data monetization means capitalizing on recorded data to generate more revenues. In today’s age, data analytics forms the very basis of strategy formation for all business enterprises, big or small. In the context of tech organizations, data analysis, and subsequent monetization becomes even more important as every activity of users can be tracked. Further, there are two types of data monetization:

Direct Data Monetization – It involves the direct selling of a customer’s data or granting third party access to it against some pre-agreed terms. These terms are generally based upon the dollar payment for each data record, and data can be shared in raw format or arranged structure as per the user requirements. A vivid example can include the email lists of users, which the other businesses can use to sort the potential customer acquisition.

Indirect Data Monetization – It involves data-based optimization which can help achieve the third party to optimally channel their marketing efforts to create more leads, and essentially convert them into long-time customers. Data can identify how to reach the relevant customer segments and understand customer behavior so that businesses can drive sales. Data analysis can also put in the spotlight the opportunities to save costs, avoid risks while achieving operational excellence.

How Tech Companies Make Money from User Data?

Having understood the notion of how money is made from data, it is important to grasp the basics of how tech giants are achieving this objective. While wondering how these companies make money while offering all the services for free, the business models being followed shed some light on revenue generation mechanisms.

Targeted Advertisements

While spending time on social media and search engines, one might encounter different advertisements related to products, services, or digital applications; targeted advertisement lies at the crux of it all. As the average time spent online is increasing globally, business enterprises are looking for novel avenues to become more accessible. The tech enterprises provide a platform to third-party organizations to advertise the products to the audience visiting the selected websites. The caveat is to do all the processes in a targeted manner so that higher percentages for lead generation and lead conversion can be achieved. Data can empower the prediction models about consumer behavior, thus highlighting the key aspects of buying power and also the relative preferences of the target segment. It has already revolutionized marketing and advertising, and some believe we’re only getting started. One of the great questions of this century is how we will parse the respective rights of the digital homesteaders and average folks.

One might think that all the data collected by the big tech giants are being sold to third-party service providers i.e., direct monetization but it essentially isn’t the case. It is on record that the CEO of Google, Sundar Pichai, and CEO of Facebook, Mark Zuckerberg have admitted the fact that certain datasets are being recorded but aren’t provided to any enterprise for promotional purposes. Rather, the model of indirect data monetization is followed; the required profile for the segment is provided by the business enterprises, and while utilizing the information in Table 1,2,3, and 4, Facebook, Google, Instagram, LinkedIn, etc. create promotional posts visible only to that target segment. These companies provide the platform for a price, via which they are making billions of dollars. The crux of the targeted advertisement is explained by Mark Zuckerberg as:

“What we allow is for advertisers to tell us who they want to reach, and then we do the placement. So, if an advertiser comes to us and says, ‘All right, I am a ski shop and I want to sell skis to women,’ then we might have some sense, because people shared skiing-related content, or said they were interested in that, they shared whether they’re a woman, and then we can show the ads to the right people without that data ever changing hands and going to the advertiser.” Business Insider

These tech enterprises are making a fortune out of users’ personal data as Facebook’s average revenue per user (ARPU) at the end of 2020 was $ 32.03; multiply it with the user base and revenue reaches the market capitalization of multi-billion dollars. In 2020, Facebook’s advertising revenue was 84.2 billion U$D. One can imagine how much money will Google, LinkedIn and Insta will be making. The canvas becomes, even more, broader as multiple products of Google and Facebook are interlinked and can be used to log in to one another. Essentially, the realm of advertising is taking a revolutionary shift from traditional to media to digital channels.

Key Considerations for Data Collection & Storage

Given the scale and scope of operations, one can imagine how much data is being collected and stored by these tech giants. But it even builds more responsibility for the management of these companies as with the advancements in technology, the cyberthreats are evolving in a similar manner. The existence of backdoors in the software and data storage centers can open new avenues for cyberattacks and proper security mechanisms should be in place to mitigate any such incidents otherwise results would be catastrophic. Just as a use-case, in 2018, Cambridge Analytica had got its hands on the 87 million Facebook users without their consent.

More so, while these enterprises outline the terms of use before the sign-in, yet these can be very confusing for novice internet users and information can be captured without the real consent of users. Thus, the terms of use can be made more explicit and easier to understand so that users can know which of their information is being stored by the service providers.

Owning Your Own Data

Not all technological products leverage user’s information and profile to run the targeted advertisements, rather there are alternatives available that can be used for a much safer, secure and private user experience. For example, Twetch can be used as an alternative to Twitter i.e., content sharing social media platform; it not only creates a two-way value creation mechanism (users can earn money for their content) but also integrates a pay mechanism via which money can be sent directly to users without the involvement of middleman. All the social interactions are ratified by users and subsequently stored in a blockchain module so that these can be accessed anywhere in a safe and secure manner.

Similarly, Relica can be used in lieu of Instagram; it essentially is an image sharing app via which users can generate income. Users having a huge fan-base can monetize the followers, and the best part is that they don’t need to advertise the value proposition or get sponsorship for it. Relica is based on the principle of micropayments i.e., having the capability to manage multi-thousand interactions in a fast, agile and seamless fashion.

In the same fashion, Dastafilez can be employed for the use instead of Dropbox and WhatsApp; Dastafilez, an innovative virtual data room, offers one of its kind solutions to offer privacy and protection of classified information via multi-factor authentication, end-to-end encryption, and advanced authorization modules. It essentially is a platform with controlled access management to share any important information or documents in a secure manner. Being a cloud-based data room platform, Dastafilez offers a host of innovative features which certainly form the unique selling propositions for the subject application. In the domain of search engines, DuckGoGo (DGG) can be used for private surfing and downloading; not only it has the feature of private search but also offers seamless tracker blocking and site encryption for free. The essence of DGG is that it doesn’t store or share any personal information via bypassing the filter bubble of personalized search results and it also doesn’t display the search results from content farms.

Conclusion

All in all, the majority of the content provided through social media internet companies is offered to users at little to no cost, and consumers have grown accustomed to accessing information found on the internet for free. This value proposition has increased the inbound traffic on these platforms, resulting in an opportunity for more data capture and thus more targeted advertisements. While these companies rely majorly on these advertisements for revenue generation, the key considerations of user consent and cyber threats should be kept in mind while following the marketing protocols. The blockchain allows you to own your own data. Many startups are now pushing that segment in order to give power back to the users.

S. Fatima Amber

She is a telecommunication Engineer and has become an expert in modern security systems. Fatima Amber has been writing on technology related topics for more than 3 years for numerous security journals. Her content covers IT security, data protection, NFC, IoT, AI and blockchain. She thinks that blockchain has more potential to secure your sensitive information than traditional applications. That's why she has joined Dastafilez. Besides writing, she loves to play badminton.