A few days ago (Feb. 12), the New York Times' Joshua Brustein wrote that Facebook's pending IPO puts personal data at a premium, calling it "the oil of the digital age."
Brustein writes, "The company was built on a formula common to the technology industry: offer people a service, collect information about them as they use that service and use that information to sell advertising."
He then examines the scenario in which some consumers are willing to share their personal data with companies in exchange for money, deals or special privileges.
Most people would be reluctant to divulge personal data for cash straight-up (it seems sketchy). Instead, they consider it a non-monetary form of currency. We're seeing this already with things like Klout, which offers special deals to people who have allowed Klout to analyze their social media interactions.
The fact is, people share massive amounts of personal data every day, and it's not for money. We are actually very unconcerned with what happens to our personal data, as long as we have fun creating it.
“The problem is that companies don’t need to pay for the information when they can get it for free," Brustein writes.
Indeed, so who's to say what data companies can or can't get for free?
A market for personal data would definitely require a distinction between information that's too trivial to be monetized (e.g. your gender), and high-value data that someone would be willing to pay for (e.g. your long-term financial data).
The marketplace needs a middle man. The most important precursor to the personal data market would be the right kind of brokers to connect companies who want this data to the people willing to share it.
Valuable data, however, generally takes years to accumulate. So people have to get something out of creating this data -- or it has to be just happening ambiently -- or they'll stop. No one is going to check in on Foursquare everywhere they go for four years to make $5.
All of this also begs the question: What is personal data? Are tweets data? How about Foursquare check-ins? Your bank history? Almost everything needs analysis, not just presentation of facts, in order to be useful. This seems like a more likely market (making sense of all the data that's circulating freely), over a data-for-dollars market.
Implications for brick-and-mortar retailers: The value for retailers is to stop thinking of customer data as a one-way transaction (they collect data about their customers), and start thinking about it the way that Internet startups (like Facebook) see it: User data should be provided back to users to create interesting services.
If I let The Gap track every time I bought new jeans, could they let me know when I might be due for a new pair? Could they let me know how my spending habits compare to other customers similar to me?
Create a better experience for the customer and they'll end up buying more. On the back end, actionable data can be used to drive down operational costs and ensure proper stock level as well.
But the question remains: How can companies get the data they want?
"In order to create a real market for data," Brustein writes (quoting Shane Green, founder of Personal), "enough people need to see an immediate, tangible benefit (in sharing their data)."