A relevant and timely report on poor use of data and article on the dark side of using personal data

June 12, 2018 |

In the Sydney Morning Herald today in The dark side of personal data and why it pays to care about it  highlighted a warning by Jim McKelvey, and co founder of Square, on the misuse of personal data and the people’s loss of control in their information.  This is an growing problem with data brokers and algorithms resulting in personal information finding its way to unintended and unwelcome sources to a worrying degree.

It provides:

A ”renaissance man” who started a billion-dollar technology company is aiming to enlighten the “dark side” of data and change how the internet pays for the stuff we put in our brains.

Jim McKelvey is an engineer, author and the co-founder of Square, a company worth more than $20 billion that allows credit cards to be accepted as payment on a smartphone. He is also a master glass artist, works for the Federal Reserve as an independent director in St Louis, founded a non-profit organisation called LaunchCode, and is building a new “business-model stack” for the media industry.

In Sydney last month to talk about the “dark side of data”, Mr McKelvey spoke to the Herald about why personal data matters – “it can be ransomed for bitcoin” – and the risk from people “drowning in data”, and losing control of their information.

“Most big companies have a data file that represents you,” Mr McKelvey said. “It determines access, interest rates, what ads you see and this file is not under your control.

“It is a new problem, 30 years ago there were two to three credit scoring companies that might have had a file on you but these days, files of data are strewn all over the place.”

A 2017 study published in the Internet Policy Review reported there are “data marketing clouds” which gather and sell an “exhaustive amount” of personal information, including credit card usage patterns, consumption data, and even TV viewing habits.

Google can link credit card transactions with data it collects from Google Maps, Gmail and YouTube to make a profile it can sell to advertisers. A recent Google-funded study showed more than 900 digital interactions led one person to lease a car.

The two general approaches to controlling personal data online are via government regulation, which may stifle innovation, or by giving people access to their information, Mr McKelvey said.

Europeans have the right to access and transport their data, which is generally the right thing to do, but the problem with that is people may alter it and fabricate things, he said.

“A project [Invisibly] that I’ve been working on for two years now, is a way to allow people to see the files that are used to create their media and pay for their media,” Mr McKelvey said.

“When I say create I mean all the stuff you watch online is advertising supported, a very small number of subscriptions being the exception, and right now that [advertising] ecosystem is completely broken. It is not paying for journalists or people who invest in quality content.

“Part of fixing that is allowing people to take control over their online identities for the purposes of consuming better advertising.”

Most advertising dollars are “hoovered up” by Google and Facebook, partially because they know who you are better than all the other middlemen in the ad market, he said.

“There are probably 400 companies that represent the intermediaries in your typical online advertising ecosystem. But typically seven are involved at any time in any transaction,” Mr McKelvey said.

“So if you follow the money from when an advertiser pays for an ad to what the poor publisher sees as revenue for having delivered the viewer, 70 per cent of the money is eaten up by middlemen. That’s why we’re losing newspapers.”

Meanwhile, Australian online advertising revenue is growing, recording a 7 per cent year-on-year increase to March 2018 with total revenue almost $8 billion.

“We need more money going to people who invest resources into making the stuff we put into our brains, not just news – TV, art, magazines, film, music and radio,” Mr McKelvey said.

“The trick is to allow users to pay more for great content and to pay way less for crap.”

His company, Invisibly, works by assigning micropayments to content after a person “pays” for access to a consortium of publishers (currently more than 2000 have signed up to trial the software) by revealing what they would like to buy or are interested in.

For example, if you need new furniture and you share that with Invisibly and it generates higher-value ad impressions for furniture makers, so each ad is more valuable than the random banner ads currently displayed on some sites. That ad revenue is then passed on to each of the publishers whose content is viewed for free.

“We’ve been at it for two years and we think the product will be noticeable in 2019 but we’re already deploying part of our code,” Mr McKelvey said.

“We are still building the coalition [of publishers] as we build the software and nobody knows if it’s going to work.

“If you do it right the advertisers, the publishers and the people can all win.

“But what you have to do first is give the people control.”

Taking a differing approach, but no less concerning, PwC as reported by the Australian in Brand trust under threat: PwC highlighted the damage in consumer trust from the misuse of information and lack of transparency.  It provides:

PwC has identified damaged consumer trust as a major threat to the continued growth of Australia’s media and entertainment industry in the wake of the Facebook Cambridge Analytica data-leaks scandal.

The consultancy firm is predicting the industry to grow at a compound annual growth rate of three per cent over the next five years.

PwC’s17th annual Australian Entertainment & Media Outlook report found that growth was unevenly distributed across the industry, with the fastest revenue growth in digitally-driven segments.

The report analysed trends and consumer and advertising spend across 12 segments and forecast industry-wide compound annual growth of three per cent over the next five years, but with sharp differences between industry segments and sectors.

But continued growth depended on remedying consumer perceptions after “numerous breaches of trust by corporates” in Australia and globally — including the misuse of Facebook data by UK consultancy Cambridge Analytica.

“Companies that get the consumer trust piece right will take it to the bank and boost investor and regulator confidence,” said Megan Brownlow, PwC Australia’s entertainment and media industry leader.

Ms Brownlow warned that a growing “trust deficit” between companies and consumers threatened their success, advising business leaders to “must measure and capitalise on their trust assets”.

Consistency, customer advocacy, transparency and ability to help clients achieve their goals were the strength drivers companies must work on, she said.

“Consistency is a particularly powerful trust driver for traditional media because they have a longer organisational legacy,” Ms Brownlow said.

The report found that the subscription television market, although a relatively small segment of the industry, was its fastest-growing sector with ad revenue forecast to rise at a compound annual growth rate of 10.1 per cent — significantly outpacing the online advertising market’s growth of 7.7 per cent.

It comes as the newly-merged Foxtel and Fox Sports entity embarks upon what has been described as “a new era” in the nation’s broadcast industry.

Foxtel shareholders Telstra and News Corp, publisher of The Australian, last year announced a deal to combine their pay-TV operations with News Corp’s Fox Sports, and the transaction officially closed in April.

News Corp Australasia executive chairman Michael Miller has said the combined entity’s initial focus would be on maximising collaboration across the company’s merged assets.

The internet advertising market is forecast to reach $12,681 million, or 65 per cent of the total advertising market, by 2022 and is forecast to overtake the internet access market ($11,507m) as the industry’s dominant segment.

Fast growth in video advertising, at a compound annual growth rate of 23.8 per cent, will see the segment account for 25 per cent of the total internet advertising market by 2022, the report said.

A substantial increase in digital revenue is underpinning total out-of-home market growth at 15.9 per cent, compared to just 5.7 per cent for physical billboards.

Strong growth in digital music is also propelling the total music market, which is expected to rise at a CAGR of 5 per cent and attract 6.4 per cent ($1,792m) of consumer spend by 2022. Digital music is expected to grow at a CAGR of 10.2 per cent.

The report forecast a reduction in the size of the newspaper, free-to-air television, magazine and filmed entertainment spending markets.

Nothing in these two articles raise any new issues.  It just highlights the continuing problem with the misuse of data and, by implication, the poor regulation and inadequate laws to protect individuals.

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