📝 The Price of Privacy

There is one thing that I believe we can all agree on: it’s incredible that the internet is free. There is immense value to be had in the worlds of information, perspectives, and connections made accessible to anyone with an internet connection and computer.

Recently we've seen an increase in people's willingness to pay for a private online experience. Apple has created a competitive advantage around it, Meta offers “Subscription for No Ads” for over €250 in Europe, and TikTok has reported tests for a similar pay-to-opt-out model. However, privacy advocacy group NYOB warns that if this trend continues, the average person could pay upwards of $9,600 a year for privacy. These subscription style models for traditionally free social platforms are generally referred to as “Pay or OK” pricing. These subscriptions offer the use of the platform while reducing tracking for advertising purposes. 

There are many examples of people's willingness to pay for increased privacy. For example, even budget travelers will often pay to go to a hotel where they'll have a private room and dedicated bathroom rather than having to share with strangers, like at a hostel. Having that level of privacy is, often, considered worth the additional cost. 

However, paying for online privacy is different than opting for that hotel. The differences can be summarized as transparency, clarity, and timing:

1. Cost Transparency: It’s easy to put together why a hotel is more expensive than a hostel. In a hostel, more beds are able to be put into the same amount of space. Bathrooms will have less frills, and maybe even be down the hall and shared. Contrastly, online experiences are often a dizzying thing to conceptualize the cost of. One privacy-savvy company, Signal, attempted to estimate the costs of providing a secure experience for their encrypted messaging app and came up with expenses of over $50M annually, just for private messaging. Signal hopes that by increasing transparency behind the hefty costs of preserving privacy, they can “grow alternatives that contrast tech surveillance”. If consumers cannot be given the transparency to understand the costs of the technology they use everyday, they cannot understand the value of the data they share.
2. Clarity on what is Private: In a hostel, guests have plenty of options to choose from. Maybe guests are booking a shared space with just their group, maybe it's a 15 person bedroom, or maybe it's a 3 person room. Either way, when one checks in, someone explains to them what to expect. For online experiences, it’s not nearly as clear. Maybe there is an incognito tab open, maybe someone posted something to a close friend's story, or maybe they bought an iPhone because they saw this ad. In any case, there are several mechanisms in consumer technology that feel private, but users may still have questions about. Compared to closing the blinds in your hotel, a simple act you can understand the impact of, navigating the privacy embedded in these platforms can be a challenge, even for someone extremely technologically savvy. Regulations are helping this, and many companies are choosing to more clearly define and share their privacy and data sharing practices. However, the majority of the time, an online experience is paired with a published privacy policy filled with legal jargon and not read by the average consumer. Without an understanding of what is and is not private online, consumers will not be able to reasonably assign value to their privacy.
3. We’re building the internet today: Hotels have been around for centuries, and have over that time developed norms. Personalized advertising is relatively new, dynamic, and rapidly changing. Hotels have had decades to adapt to changing consumer expectations. Instead of waiting for the market to innovate to protect consumer privacy, we can choose to build our systems with privacy in mind. EU regulations are encouraging firms to implement privacy by design as a best practice for new and existing technology. However, until standards for privacy are implemented globally, the internet cannot protect user privacy due to its global nature.

Privacy: A right or an interest?
Most people, when asked, fall somewhere on the spectrum between two schools of thought: 1.) “I have a right to privacy online! We need to do something about this!” or 2.) “Privacy online would be nice, but there are so many more pressing issues that I care about first.” The reality, as researched by Science Magazine, is that there is context-dependence on people's concern for privacy. Digital privacy is very sensitive to any monetary value exchange, making Pay or OK less attractive to the average consumer.

Potential Negative Externalities
In a world where paying a premium for an ad-free, privacy safe experience is the norm, families with means could pay up to €35,000 annually to leverage services accessed for free today. This shift could create negative repercussions beyond the hefty fee. 

1. Free education resources reduced: Whether it’s a how-to on YouTube or something like Linkedin Learning, many free or affordable learning platforms use advertising as a significant source of revenue that offsets the costs of development. Less ad-funding could mean less investment in currently free and helpful resources. Consumers could find it more challenging to find resources, there could be less incentives for creators to make content, and more premium content could be payment-gated. 
2. New intermediary variable for marketers created: The ability to opt for a more expensive version of a service would denote an income level without people actually sharing their income. This would create a proxy variable that marketers could leverage to target people based on an estimated income group. Since the 2022 Meta Platforms settlement, many advertising technology companies have been making strides to remove discriminatory variables for sensitive categories. Charging for private experiences inherently creates a sensitive intermediary variable. 
3. More ads to young people: If we employ a pay or ok model, it’s likely that this will be paid directly to specific platforms used. Young people are quicker to discover and adopt new platforms, and would be less likely to have disposable income to spend on trying new platforms. This puts youth at risk for seeing more ads and opting in to privacy agreements they may not spend the time to read or understand. While federal regulations mandate protections for those under 13, older teens may be more likely to opt into new platforms without willingness to pay for privacy. 

Pay or OK models are a step towards allowing consumers to have additional control over their privacy online. However, they have a number of risks that disproportionately affect younger and lower income individuals. Without true transparency about the cost it takes to preserve privacy and clarity on the actual privacy received, consumers will not be able to fairly evaluate their willingness to pay for privacy. Global regulations are needed to incentivize technology companies to increase transparency in these areas.

Today, the price of privacy falls on users who pay for online experiences by sharing their data for advertising purposes. In a Pay or OK model, the price of privacy still falls on users who would pay upwards of $35,000 annually. As we continuously evolve the internet, we can choose to build systems that support privacy, so users aren’t paying the price.

Edited by: Meghan Cochran