Best New Ideas in Money: Americans’ data is worth billions — and you soon might be able to get a cut of it

Best New Ideas in Money: Americans’ data is worth billions — and you soon might be able to get a cut of it

In today’s data market, every purchase you make online, every website you click on using a browser and each move you make that triggers your location can be sold by a company.


Some 2.5 quintillion bytes of data are created every day — a massive amount. If 2.5 quintillion pennies would be laid out flat, they would cover the Earth five times. Most of the data is harvested, stored and owned by large companies. When Facebook FB, +0.76% Instagram and Twitter TWTR, +3.34% sell this data to advertising companies — $44 billion a year — users get nothing in return except the free use of the social-media platform.


Now, nearly a dozen startups have emerged to enable consumers to reclaim that information and, if they want, to sell it directly to advertisers, creating a kind of “universal basic data income” and giving everyone a piece of their own revenue. If they don’t want to sell the data, they have at least secured their information and assured their privacy.


image

The annual size of the global datasphere.

Many of those programs work by scraping data from banking and social-media apps with users’ permission, keeping it all in one central network and allowing it to be auctioned off to the highest bidder. Facebook and Twitter already collect large amounts of data on consumers, but users retain enough privacy to keep leverage over the companies.


As Facebook showed when it attempted to secure user information from banks earlier this year, a lot can be gleaned from user transactions that the social-media giant does not yet know. Through these new services, users can sell micro-targeted information directly to marketers, such as how many times they purchase groceries each week or what shoe stores they shop at.


Digi.me, a personal-data company based in Washington, D.C., said the data market is shifting to enable consumers to decide exactly what to share, first by letting them control it all. The company, which has raised more than $45 million since its founding in 2008, allows users to download their own data from 15,000 third-party sources including health tracker Fitbit FIT, -1.97% GPS-tracking-technology company Garmin, and social-media platforms Facebook, Instagram, Pinterest and Twitter.


“The big idea is that individuals ought to have a perfect copy of all of their data in one place under their control,” said Shane Green, chief executive officer of Digi.me.


Once users have scraped their data from those sites, they can decide whether they want to sell them to third-party advertisers for cash. A user can sell anonymized information about where they have traveled to, the airlines used, general location data or hidden-purchase information showing their spending habits.


Benefiting both parties

Green noted while some users found Facebook seeking their bank information invasive, others may consent to sharing smaller amounts of information. A consumer, for example, could disclose how often she shops at a specific coffee shop to that company’s rivals. That person can then be targeted more accurately with promotions from the coffee shop, and the coffee shop will spend less money finding its niche audience, Green said.


“Time is money, so the more efficient these things can be and the more friction that can be taken out of the process, the more it benefits both parties,” Green said. “Selling your data can match you with better opportunities.”


Your data as passive income

Datum, a San Francisco-based company, lets users sell their information directly, positioning itself as the “eBay of data” — a marketplace, of sorts. Data generated by using apps is stored on the encrypted, decentralized network and only shared if the consumer consents. Once he decides to sell it, the advertiser who buys it is given a key to decrypt the data. Then the company can use that data to better target users.


Datum claims a person could make up to $2,000 of passive income a year by continually auctioning off her data. That includes varying prices for different kinds of data, such as $5 per well-targeted email or 10 cents a month from general location data. Once a user consents to Datum collecting her data, the company does the rest, scraping it from accounts.


A new paradigm

Startups such as Digi.me and Datum have given way to a new paradigm of security and privacy, said Mick Hagen, CEO of decentralized-messaging-technology company Mainframe, based in Lehi, Utah. The decentralized way that companies such as Datum are built is integral to the idea of reclaiming data, he said. The technology used, known as blockchain, involves hosting data on the computers of many participants. Blockchain is a public digital ledger on which the cryptocurrency bitcoin BTCUSD, -0.51%  is built. Each transaction of bitcoin or change to the blockchain must be approved by the entire chain through a cryptographic process, meaning no one person is in control of it.


“This idea of being able to control your own data or sell your own data is only possible if it’s no longer being managed or hosted by a centralized authority,” Hagen said. “By leveraging blockchain technology, this is a lot more feasible because data are no longer owned by anyone but the user, or whoever has the keys to unlock that data.”


While apps like Datum allow consumers to sell user data directly to advertisers, Hagen notes that through decentralization, social-media networks soon won’t even need advertising to remain profitable. With all data being stored on decentralized servers and through the self-sustaining blockchain model, no one person or company will have control. Social-media companies will likely resist this major disruption to their ad-revenue model, he noted.


“It is not going to be these incumbents that create new decentralized models,” Hagen said. “It is going to be startups that champion privacy and freedom and not keeping our data in the hands of the few.”


Privacy and censorship

Hagen said a move into decentralized social media has been stoked by fears of censorship and privacy concerns. With social-media giants making decisions to remove controversial actors such as conspiracy theorist Alex Jones, some users fear they will be silenced online, Hagen said. Decentralized apps mean no one person would have control of data or policy.


“It’s easy to say Alex Jones is crazy, but where do you draw the line?” he said. “Today it may be Alex Jones, tomorrow it may be someone I agree with. One reason these decentralized social-media apps are on the rise is because many people believe information should be free.”


Mark Weinstein, founder of privacy-centric social network MeWe in San Francisco, said the future of privacy involves taking back control of our data, but not by selling it directly. His app contains no advertising, and it does not track or share personal data.


“There is strong evidence that people want privacy and want their data taken out of the equation,” he said.


Though Facebook has faced a series of controversies regarding privacy in recent months, analysts remain optimistic about the future of the company, and others argue there is no tech bubble about to burst on the horizon. In a “post-privacy” world where many consumers either don’t care about online secrecy or say they have nothing to hide, users may value the use of sites such as Facebook and Twitter more than their data. What’s more, it’s unlikely that such small startups will make a dent in large companies operating all over the world.


Still, major hacks and data scandals have underscored the need to reclaim data for profit, said Dana Budzyn, who is creating a monetization framework for Digi.me at UBDI. Data breaches have shown users that social-media companies have much more data than they may have thought. The now-defunct Cambridge Analytics, a political data firm hired by President Donald Trump’s election campaign, gained access to information on more than 50 million Facebook users.


“People are beginning to realize that everything they do is tracked,” Budzyn said. “People are starting to realize they are valuable, and some are starting to consent, saying ‘I don’t mind if companies sell me; I just want a piece of it.’ ”


Kari Paul is a reporter covering personal finance for MarketWatch.