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Just How Much Is Your Privacy Worth?

A new study is one of the first to explore the monetary value of personal information shared online.
March 21, 2012

Most of us would shy away from making purchases in a foreign country if we didn’t know the exchange rate. Yet, if privacy is the true currency of the Internet, as many argue, millions of us are doing that very thing every day. Meanwhile, Internet giants amend their privacy policies in ways that allow them to harvest and sell even more of our personal data. While privacy campaigners protest, users generally vote with their clicks and carry on regardless.

So should we conclude the Internet generation is happy to trade its privacy for free or cheaper Web services? Not according to Nicola Jentzsch of the German Institute of Research in Berlin, and colleagues, who last week published research showing that most people prefer to protect their personal data when given a choice and that a significant proportion are willing to pay extra to do so.

The researchers directed 443 students to a website offering tickets for a real movie showing, sold by two different vendors. Although the tickets were subsidized, the volunteers, who were able to purchase one, two, or no tickets, had to pay most of the cost themselves.

When both vendors offered tickets at the same price but only one required customers to enter their cell phone number, the more privacy-friendly vendor got 83% of sales. When participants were offered the same choice, but with an additional charge of 50 euro cents from the privacy-friendly cinema, its market share fell to 31%.

“It turns out that when you are good on privacy you can charge more and make a greater profit,” says Sören Preibusch, of the University of Cambridge, one of the authors of the study, published by the European Network and Information Security Agency, an agency of the European Union.

When only one of the two vendors stated it would use the customer’s e-mail address to send them advertisements, and both charged the same price for tickets, 62% of sales went to the privacy-friendly ticket retailer. But when the privacy-friendly vendor charged 50 euro cents more, its market share dropped to 13%.

“What people say in surveys is that they care about privacy, but what they actually do is spend their time constantly updating their status on Facebook,” says Alessandro Acquisti, codirector of the Center for Behavioral Decision Research at Carnegie Mellon University, who was not connected with the new research. “This has led some to conclude that people no longer care about privacy. This new data, along with similar work we have done in the U.S., shows this is not the case, and that the desire for privacy is not dead after all.”

Privacy protection is at a critical juncture on both sides of the Atlantic. In January, Google announced it would merge personal data gathered from the users of dozens of services, including YouTube, Gmail, and Google+, saying this would allow better searches and more targeted advertising. On Monday, France’s National Commission for Computing and Civil Liberties, which represents European regulators, wrote to Google that preliminary findings suggest that the new policy does not comply with the European Data Protection Directive.

The E.U. is working on new data protection rules that would include fines of up to 2 percent of a company’s global revenue. Last month the Obama administration set out the framework for a new privacy code that would give consumers more control over the use of their personal data.

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Illustration by Rose Wong

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