by Adam Tanner
It’s not that the emperor has no clothes. But the attire is more piecemeal and ragged than many had feared. Acxiom CEO Howe said his own file had six or seven mistakes, but noted that the errors come from data wholesalers supplying Acxiom with the raw material for what might be two thousand data points in an individual file.
Before going live with the site, Howe had worried that many users would opt out entirely, leaving Acxiom with less comprehensive files. But something surprising happened as people reviewed their AboutTheData.com files. Eleven percent corrected inaccuracies in their files (with political party the single item changed most often), leaving Acxiom better, more valuable data to sell. Fewer than 2 percent of the half a million people who visited AboutTheData.com early on said goodbye for good. Howe had forecast that as many as 15 percent of visitors would use the new site to opt out.
“Managing your data or your preferences or your permissions should be something you think about as often as managing the maintenance of your car, or managing your yard, or managing your health care,” Howe predicts. “It is just going to be something that is part of everybody’s routine because those that do it are going to have better experiences. They are going to have better offers, they are going to get unique content, they are going to get better information.”
Many users corrected their files for free. But what if consumers received cash or compensation in exchange for their information? Marketers would get the most accurate data because no one knows you better than you. Under such a system, companies would offer money, status, or special offers to make it worthwhile to share personal data. In the last few years, a number of companies have begun embracing such a model to empower consumers. Some of their founders have dramatic stories of their own.
18
The Not-So-Enriching Business of Privacy
Profiting from Privacy
Shane Green nervously unveiled his startup’s website on November 11, 2011, at exactly 11:11 a.m. Place your private information on Personal.com, he told the world, and eventually companies will pay for access to your information and to market to you. Not pennies, but real money—at least $1,000 a year for the average consumer. On the day the site went live, Green felt pangs of doubt. “Oh, my God, do we really know what we are doing?”
Some Internet entrepreneurs and commentators thought he was committing a major blunder. Not only could he not safely store personal details such as passport information, medical records, passwords, and alarm codes, but what he was doing was potentially reckless, possibly vulnerable to hacking, the naysayers said. Things did not turn out as either Green or his skeptics thought they would.
Since the 1990s, a series of startups have sought to create tools to help consumers navigate the data-hungry world with greater privacy. With so many people accustomed to receiving free Internet services, these entrepreneurs have struggled to sign up paying customers. Several of these businesses have gone under.
By 2014, the market was becoming more receptive after Edward Snowden’s revelations about the US government’s gathering of vast troves of personal data. “People are going to be more conscious of the fact that what they do put out there is going to be public, and therefore I would say their online behavior will be altered,” says Emanuel Pleitez, chief strategy officer at data broker Spokeo, who also ran for mayor of Los Angeles in 2013.
The public is also slowly becoming more aware that firms gather and store as much personal data as they can. “Unfortunately this type of data collection—we’re at the very beginning of it,” says Dan Auerbach, formerly of the Electronic Frontier Foundation, a privacy and consumer rights advocacy group. “We’re kind of entering a new era where data can just be stored forever. Back in the old days you might be able to leverage this data for a little bit and then have to throw it away because, oh, there is just too much data to keep. But now it is really realistic to suggest companies can do this forever.”
These factors created opportunity for Personal.com and other privacy companies. But Green struggled to interest investors. Early on, the entrepreneur twice met Esther Dyson, a journalist-turned-investor whose many life adventures include training to become an astronaut in Russia. She had served as chairwoman of the Electronic Frontier Foundation. Dyson said she was fascinated with the idea. She told him that she and others invested in a number of privacy startups that never really got off the ground, often after burning through millions of dollars. “Everyone who ever became good at this idea of empowering people with their data ended up going to the dark side,” she said.1
Reputation.com
Out in Silicon Valley, another firm with the same goal of setting up a personal data vault, Reputation.com, took a different path. First it learned how to make money—then it set its sights on empowering people with their own data.2 It spent millions of dollars a year advertising in newspapers and on radio.3 Set up by Harvard lawyer-turned-entrepreneur Michael Fertik, Reputation.com built its business around removing or obscuring damaging Internet information and reviews.
A typical client might be a lawyer, doctor, or independent contractor who fears that a negative review could harm business. Fertik cites the example of a builder who does a subpar job once every few years and then faces unrelenting Internet criticism from a disgruntled customer. Or an employer who fires someone for stealing and then is accused of racism. Reputation.com seeks to make some of the negative postings fall lower in Google search rankings by adding more positive posts about the client, such as on a blog site or LinkedIn profile, or by collecting real reviews from real customers. Prices range from less than $1,000 to $6,000 for such help. “Our product is not perfect,” Fertik says. “If there are a hundred [negative] data points out there, we can probably put fifty back in the tube.”
A man possessing seemingly unending energy and opinions, Fertik grew up on Manhattan’s Upper West Side and attended private schools. His father directed commercial and documentary films; his mother worked as a psychotherapist. After attending Harvard College and Harvard Law School, Fertik set up ReputationDefender.com, which became Reputation.com after he bought the domain name for $200,000. At his office headquarters in Redwood City, in California’s Silicon Valley, Fertik works from a standing desk in front of a Mac-Book Air laptop. Sometimes he wears a weighted jacket that provides exercise as he moves.
What really excites Fertik—and he is often quite excitable—is the idea of allowing people to make money by creating their own data vaults, something the company has worked on for many months. On a recent afternoon, engineers in their twenties and thirties, from places as far afield as Russia, Brazil, and India, are sitting around a conference table. They’re watching a projection at the end of the room as they try to put the final touches on their latest innovation.
The team has assembled public information on tens of millions of Americans, and is fine-tuning a software program that scores everyone’s lifetime earning potential. They factor in details from résumés and online sites such as LinkedIn, which lists education, past jobs, and geographic location. Such data will enable Reputation.com to tell advertisers who has the potential to make, say, $500,000 a year in the next ten years.
With these scores, Reputation.com is hoping to allow people to sell their information to the highest bidders. If, for example, you share that you travel a few times a year to southern Florida, stay in upscale hotels, and spend your holidays playing golf, various businesses may be willing to pony up cash for the opportunity to market directly to you. Or perhaps they will offer bonus points or status in their loyalty programs or other incentives. To make such a system work, Fertik says he needs data on tens of millions of people, insight about customers that makes them interesting to marketers, and user permission.
“The big open secret about the Internet is that it’s a cheat. The people are constantly being exploited without their knowledge or permission,” says Fertik. “The Internet companies that tout the value system of being transparent rely, fundamentally, on being completely nontransparent
with you when it comes to your information.”
Data-gathering has become commonplace for all transactions beyond forking over cash at a store—even if the vendor says it really cares about privacy. For example, Adam & Eve, a company that sells sex toys and adult videos, also rents address lists of its customers so that other marketers can contact, for example, women who have bought porn in recent months. Chad Davis, the director of marketing for PHE Inc., which owns Adam & Eve, says, “We really do take our customers’ privacy very seriously.” The company does that by screening the clients who rent its lists—to ensure appropriate marketing use of its data—but not by keeping that data private.4 Like others that rent mailing lists, the company also seeds its lists with a few false addresses so it can see if those renting the lists market in the way they have said they would.
Those who read Adam & Eve’s fine print learn that the company does rent postal addresses to other companies, although it allows customers to opt out.5 Some have complained that they did not know their data would be sold. “I ordered some fun bedroom items for my wife from adam&eve.com,” one man wrote on reddit.com. “Biggest mistake I’ve made in a while. Since my single, one-time order, I have received DOZENS of graphic pornographic catalogs showing up in my mail.”6
Allowing consumers to profit from their data remains a difficult business proposition. Reputation.com, Personal.com, and others seeking to create data vaults face a chicken-and-egg dilemma: What marketer would pay substantial money for personally curated information when so few have signed up? And how could the data vault induce consumers to join without real benefits?
Reputation.com tried to get around this problem by quietly scraping public data off the Internet on millions of people. “We are gathering data without people’s knowledge right now in order to learn and get information, but we are not sharing it or selling it,” Fertik says. “Unless you get enough data, you don’t have enough insight. And if you don’t have enough insight, you can’t actually get the vendors to sign up. And if you can’t get the vendors to sign up, you can’t get the consumer to sign up.”
That a privacy company assembles profiles on millions of people without their knowledge is a bit surprising. “I don’t think it is creepy because we don’t plant any cookies. . . . We basically find stuff that is on the open Internet about people,” he says.
To fund the effort, the company relied on revenue from its businesses to improve online reputations and its service that removes details about individual clients held by data brokers such as PeopleSmart, featured in Chapter 6. “I could have gone and tried to raise $100 million on this theory that there is a data privacy vault thing in the future and what happens is you end up with a complete bereft piece of shit,” says Fertik. “Would you spend $10 million if you have no revenue, no real customers, no real user base? That’s an ‘If you build it, they will not come’ story.”
When Identity Meant Life or Death
Personal.com, however, took this riskier path, creating a personal data vault with the hope of figuring out how to make money. Direct experience with how personal information can determine a person’s fate bolstered the company’s conviction. Two of the founders, Tarik Kurspahic and Edin Saracevic, grew up in multiethnic Sarajevo. For centuries, Muslims, Orthodox Christians, Christians, and Jews lived side by side, sharing cafe tables along pedestrian streets, joking, gossiping, flirting, and enjoying life. Then in 1991, Yugoslavia started collapsing. Ethnic identity—Muslim, Orthodox Serb, and Catholic Croat—became a matter of life and death.
Kurspahic was a classic Yugoslav mix: son of a Belgrade Serb and a Bosnian Muslim. As war spread elsewhere in Yugoslavia, some warned that the ethnic groups in Sarajevo would fight. “There’s no way, no chance that that will happen here,” Kurspahic thought. In April 1992, two days before his eighteenth birthday, thousands marched through the streets in a peace demonstration. He joined a crowd in front of the Parliament building. Later, a gunman fired into the crowd, killing two women. Like other hotheaded eighteen-year-olds, he just wanted to find the guy who fired the shots and “toss him out of the window.”
The longest siege in modern history was about to start. Kurspahic and Saracevic, who had worked as event planners, did what they could to survive. Neither was particularly religious, but society marked them as Muslims—their names gave them away. Both served with local neighborhood defense forces. Kurspahic fled Sarajevo later that year and moved with his family to the United States.
Some years older, Saracevic remained for another two years in the besieged city. When he was growing up as the child of Muslims, the national government promoted “unity and brotherhood” of all its ethnic groups. Saracevic thought of himself as a Yugoslav, not a Bosnian or a Muslim. Just before the start of the war he and an ethnic Serb business partner had finished building three sandwich shops, sort of like McDonald’s but in the shape of windmills. With the warmer weather of spring approaching, it seemed like a great time to open a sandwich business. He had planned to install the first windmill in just two days. He lost his entire savings.
During the war, Saracevic continued his entrepreneurial activities when possible. At one point he printed more than two hundred T-shirts embossed with the slogan “United Colors of Bosnia.” Within hours, he sold all of them to foreign journalists covering the war. In 1994, he produced the movie Misaldo (which, spelled backward, means “I am leaving” in Bosnian), a series of satirical commercials about the war. One for Nike sneakers showed people running for their lives in Snipers’ Alley. The film gained him an invitation to the Berlinale International Film Festival. The United Nations escorted him out of the besieged city. Saracevic then moved to the United States.
Shane Green watched the Bosnian war from afar, outraged that the West waited years before intervening. His interest in global affairs had blossomed during a 1987 high school trip to Europe that included a day in East Berlin. When his school group arrived on the western side of the Berlin Wall, he stepped too close to the imposing structure, a few feet inside East German terrain. A Communist guard, shouting through a loudspeaker, ordered him to step back.
Later that day he visited East Germany’s largest department store and chatted with a sales clerk. The conversation aroused the attention of a security guard who demanded to see his passport. Green’s chaperones had warned him to avoid exactly such a situation in which an East German official might take away travel documents. He felt helpless and angry—he did not want to conform to such a system. After he left East Berlin he burst into tears. These experiences inspired Green to become an evangelist for the individual’s right to control his or her own data. “I’ve learned from my whole life experience to be suspicious of institutions or even people who have power and use it in ways that are not transparent,” he says.
After the Bosnian war ended, Green traveled to Sarajevo several times to rebuild playgrounds and render other help. In Washington, DC, he met Saracevic and Kurspahic. Together they created the Map Network, a company making digital and print maps for special events such as the Super Bowl. The founders, who owned about half the shares, sold the business in 2006 for $37.5 million but continued to work there. Nokia, in turn, bought it the following year.
With 1.2 billion people owning Nokia devices at the time, Green saw the staggering potential of big data generated from cell phones. He suggested that Nokia allow users access to their own data. “The amount of data that was able to be captured kind of blew my mind,” he says. The company was not interested in that vision. Green and his Bosnian partners began to ask, “What would it look like if we turned this whole model upside down and built a platform for individuals to become the ultimate gatekeepers, controllers of their own data?” The idea for Personal.com was born.
Slow Start
Green, Saracevic, Kurspahic, and two others founded Personal.com in 2009. For the first two years they designed the site and the software behind it, which encrypts user data and promises never to share it without permission. People can upload
personal documents and information such as house and car insurance policies, credit card and frequent flyer numbers, alarm codes, bank accounts, tax records, medications, passports, and other ID details—even clothing sizes and other minutiae of daily life.
By the end of 2013 Green had raised $20 million, including from AOL founder Steve Case, who now leads investment company Revolution.com, and Ted Leonsis, the majority owner of several Washington, DC–area professional sports teams. By contrast, Reputation.com raised $65 million in capital over several rounds.
In his pitches, Green—whose rimless glasses, trimmed beard, and short hair recall one of the best-known photos of a middle-aged Steve Jobs—stressed that his company would establish a fair market value for personal data. “We believe the average U.S. consumer can earn $1,000 or more annually,” he told potential investors.
His pitch cited car buyers as an example. “Declare your intent to purchase a new car, add relevant criteria to your existing car data and let the world compete for your attention and your business,” his investor prospectus said. Marketers would gain direct access to customers just as they were ready to buy; he cited, as an example, “213,000 consumers with luxury cars whose leases expire in the next 90 days.” Another projected use would enable people to advertise their travel plans and allow marketers to send them discounts ranging from 10 percent to 30 percent. The company expected to make money by charging a 10 percent commission.
Personal.com’s cofounders, Edin Saracevic, Shane Green, and Tarik Kurspahic (from left), at the firm’s Washington, DC, office. Source: Personal.com (reprinted with permission).
Personal.com’s initial investment did not translate into many customers after its November 2011 beta launch. Fewer than six thousand people signed up in the initial months, and many who did found it daunting. Those who persevered needed hours to enter all their data and documents, a process as satisfying as sorting bills into an accordion file.