I'm in Munich today and tomorrow to cover the DLD conference, a kind of tech equivalent of Davos. Rather like the World Economic Forum it's a get-together of entrepreneurs, investors, a few academics and journalists – although this time around the focus is very specifically on tech and the web.
And much like its older Swiss brother, the whole shebang has to have a funky catchphrase, which in this case is “Patterns That Connect”. Quite what that means is anyone's guess, but then at least it's not quite as meaningless as Davos 2013's “Resilient Dynamism”.
Nonetheless there are a few interesting themes here – one of which is something called “Big Data”. According to IBM, we create 2.5 quintillion bytes of data every day – whether that's financial inputs, the written word, photos and videos, weather sensors or GPS traces. As a result, a staggering 90% of all the data in the world was created in the past two years alone.
And the truth is that we are only now coming to terms with this enormous overflow of numbers, figures and bytes – hence “Big Data”, which is a crude term for any scheme to find meaning in this mess. This is hardly a new phenomenon – businesses have been mining the information they have on their consumers for years.
However, there are two problems these days: the first being the sheer quantity of data companies own and aren't sure what to do with. The second is that consumers are increasingly aware that their personal data is being used by all sorts of corporations, usually to try to sell them things, and are understandably concerned about their privacy.
A good example is what happened when US retail chain Target tried to use its data to sell to pregnant ladies. It had worked out that the time a family's spending most increased was when a woman was in the first trimester of pregnancy. So its boffins scanned customer purchase records, looking specifically for clues: who was buying unscented lotions, or supplements like calcium, magnesium and zinc, for instance. And they sent them vouchers for maternity clothes and suchlike (the full story on this can be found here).
The problem was that consumers had, well, let's say mixed reactions when they realised that Target MIT have enough data to discern whether they are pregnant when they may not have told friends or family yet. In fact, at one point Target received a complaint from a customer asking why Target was suddenly sending his high school aged daughter coupons for maternity clothes when she was not (to his knowledge) pregnant. You can probably guess the punchline to that story.
You get the point: mining big data also involves occasionally hitting an emotional water main with all the consequences that go with that. Particularly when consumers are unaware of the data they are divulging.
But many of the most successful web companies rely on such techniques to make money.
For instance, most of us are vaguely aware that when we use a loyalty card in a particular store that that company may use that data to market stuff to us in the future. However were you aware that if you have the free Angry Birds app on your phone or tablet, it's constantly sending your location information back to Rovio, so that it can target specific ads at you?
I've touched on this question, of the perceived contract between an institution or company and the user, when I wrote about social networks such as Instagram, Facebook and Twitter recently. All the signs are that the backlash I predicted back then is underway. Instagram lost a chunk of its userbase after it threatened to change its terms of usage to ratchet up its control over users' photos. Facebook is, for the first time, losing users.
And companies which specifically market themselves on the basis of their stringent privacy conditions are benefiting. Path, a new social network set up by Dave Morin, a former Facebook employee, is a great example. Two of its main attractions are that 1. It limits your social network to a far closer and smaller group of friends and, more intriguingly from my perspective, 2. It doesn't make its money by advertising to you (using your data), a la Facebook, Twitter, Google etc. Instead it will make its money by selling users add-on extras like filters for your online photos and, in the coming months, personalised profile templates and colours.
In other words it will be a freemium product, where you get the app for free but you can buy optional extras if you're a keen user. The signs are that while trust in advertising-funded services is being challenged, freemium businesses like Evernote and Dropbox retain customer trust. I gather Walter Isaacson wrote his Steve Jobs biography on it; ubiquitous musician Will.i.am uses it to share elements of his upcoming tracks. I store all my documents (even sensitive ones) on Dropbox these days. Similar story with Evernote.
So this is not merely about people valuing privacy – it's also about them valuing a service which doesn't make them the product rather than the user.
Finally, it's a constant refrain that young users are less focused on privacy and covering their data footprints than their paranoid parents. But consider for a moment the most successful app among young users over the past year: Snapchat. An instant message app whose USP is the very absence of data.