Monday, May 7, 2012

"How A Private Data Market Could Ruin Facebook" (FB)

From the Physics arXive blog at MIT's Technology Review:

The growing interest in a market for personal data that shares profits with the individuals who own the data could change the business landscape for companies like Facebook

Facebook's imminent IPO raises an interesting issue for many of its users. The company's value is based on its ability to exploit the online behaviours and interests of its users. 
To justify its sky-high valuation, Facebook will have to increase its profit per user at rates that seem unlikely, even by the most generous predictions. Last year, we looked at just how unlikely this is.
The issue that concerns many Facebook users is this. The company is set profit from selling user data but the users whose data is being traded do not get paid at all. That seems unfair.

Today, Bernardo Huberman and Christina Aperjis at HP Labs in Palo Alto, say there is an alternative. Why not  pay individuals for their data? TR looked at this idea earlier this week.

Setting up a market for private data won't be easy. Chief among the problems is that buyers will want unbiased samples--selections chosen at random from a certain subgroup of individuals. That's crucial for many kinds of statistical tests.

However, individuals will have different ideas about the value of their data. For example, one person might be willing to accept a few cents for their data while another might want several dollars.
If buyers choose only the cheapest data, the sample will be biased in favour of those who price their data cheaply. And if buyers pay everyone the highest price, they will be overpaying.
So how to get an unbiased sample without overpaying?

Huberman and Aperjis have an interesting straightforward solution. Their idea is that a middle man, such as Facebook or a healthcare provider, asks everyone in the database how much they want for their data. The middle man then chooses an unbiased sample and works out how much these individuals want in total, adding a service fee....MORE
HT: the WSJ's  Ideas Market blog