The Competitive Advantages of Data Privacy

Photograph by James Braund

As data breaches become a fact of life in the age of cloud computing, new evidence suggests that consumers are seeking out companies that protect their privacy. According to Forrester Research, people will choose to give their business to firms with good data hygiene in the same way that, in the 1990s, they looked for companies with strong environmental records.

Forrester will publish a survey this week in which 62 percent of respondents say they would be “not at all likely” to repeat a purchase from a company that shared their personal information with a data broker, and that 37 percent of them have bailed on an online transaction due to something they read in a company’s terms of service. The study, which was commissioned by analytics firm Neustar, also suggests a growing familiarity with ad-blocking and other privacy tools. Here’s a chart describing 1,069 adults’ browser settings.

Forrester concludes that a growing awareness about companies’ use of consumer data will lead consumers to expect simpler, more graphical privacy policies. The research firm also argues that “misuse and abuse of data will impact profitability” as a result of fines and lost consumer trust. In presenting the study, analyst Fatemeh Khatibloo told reporters that privacy is “the next green movement.” In a series of recommendations, Forrester argues that companies should respond by “stress-testing” their data operations, and turn privacy policies into a marketing opportunity.

So what to make of all this? I confess I’m skeptical. First, given that millions of Americans still use dial-up service to get their Internet, can we be sure that most of the country can even define “browser,” let alone “ad block plug-in?” And, more significant, will consumers really ditch companies over what they do with data? After all, Facebook remains pretty popular—even as it cuts data deals to find out what you bought at the local drugstore.

Even if privacy does become the new green movement, that could bring its own downside. Recall, for instance, the spate of “green-washing” that occurred as companies tried to jump on the eco-bandwagon. In the case of data, this may be happening already—popular image site Pinterest touted its “Do Not Track” feature on the same day it announced a plan to massively expand its data collection habits.

In response to these concerns, Neustar’s Chief Privacy Officer, Becky Burr, told me that there really is a bona fide privacy movement afoot. She says it’s driven not just by consumers, but by companies that fret about their regulatory exposure in the U.S. and, especially, in Europe. This is a fair argument. It’s possible that Google, Apple, and others will raise their data protection game—if for no other reason than to avoid the fate of companies like Nike or Shell, which (rightly or wrongly) came to be singled out in the 1990s for the overall sins of their industries.

The Forrester study, which was conducted in March, will be released on Wednesday. It was based on a survey on 1,053 adults “online” (a sample that likely comprises a higher degree of privacy-conscious consumers.)

Also from GigaOM:

BYOD, the Cloud, and Privacy (subscription required)

Even Nokia Thinks There’s a Windows Phone App Gap of Sorts

Amazon Quietly Slashes Book Prices to New Lows in Apparent Competition With

Twitter Comes Under Fire for What Critics Say Is a Lack of Response to Rape Threats

Microsoft Follows Google Into South Africa to Prove White Space Broadband Potential

Before it's here, it's on the Bloomberg Terminal.