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Dan Lyons explains that the Internet economy only looks free. In fact, it's just operating off of a new medium of exchange: privacy.

What's happening is that our privacy has become a kind of currency. It's what we use to pay for online services. Google charges nothing for Gmail; instead, it reads your e-mail and sends you advertisements based on keywords in your private messages.

The real holy grail is your list of friends. With that information, marketers can start sending more targeted messages. If you like a certain movie, or album, or mountain bike, your friends will probably like those, too. So they'll be good targets for ads for those products. Of course, your friends are not going to buy everything you do. It's not pinpoint accuracy. But the data helps marketers "narrowcast" their advertising. And it sure beats buying commercials on TV or splattering ads all over the Internet.

The genius of Google, Facebook, and others is that they've created services that are so useful or entertaining that people will give up some privacy in order to use them. Now the trick is to get people to give up more—in effect, to keep raising the price of the service.

These companies will never stop trying to chip away at our information. Their entire business model is based on the notion of "monetizing" our privacy. To succeed they must slowly change the notion of privacy itself—the "social norm," as Facebook puts it—so that what we're giving up doesn't seem so valuable...The problem with buying things with your privacy is you really don't know how much you're paying. With money, five bucks is five bucks. But what is the value of your list of friends?

Photo credit: AP Photo/Vincent Thian.

By Ezra Klein  |  February 19, 2010; 10:06 AM ET
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He's absolutely right. But the problem didn't start with Google's Buzz or Facebook's change in its privacy features. In fact, it didn't even start with the Internet -- there have been data warehouses that compile dossiers on individual consumer behavior for a long time. The Internet just made it easier for marketers to use your data without any apparent cost. Tracking cookies, clear gifs, and other coding follow every move made on the net, and have been giving marketers a wealth of data to mine for business purposes. Google just was more obvious in how they were using that data, and it offended people. But if people would pay attention to the data culling that already goes on online in the name of business, they should be just as creeped out. I'm creeped out everytime I see the ads on Facebook that are keyed to groups I have joined, organizations I have "fanned", my age, gender, or geographical location, just as I am keenly aware of such targeted ads elsewhere on the web. But many people like such ads (or so marketers say), and no one really makes much effort to read privacy policies, or take steps to erase cookies, block clear gifs, or otherwise pay attention to controlling the data collected about you online.
The Electronic Freedom Foundation and Electronic Privacy Information Center do a good job of monitoring these issues, but more people need to educate themselves about what is going on.
I coordinated a legislative committee on privacy issues a decade ago, and the background research I did was frightening even then. But the issues aren't even on the radar of most individuals.

Posted by: reach4astar2 | February 19, 2010 11:35 AM | Report abuse

It's not just that the price is hard to define, it's inordinately variable from person to person or even moment to moment. For some people who post on facebook that price has been their liberty (albeit perhaps deservedly so). For some people outed by Google Buzz it might be their lives.

Even as the ad brokers qua social network sites try to aggregate everything about individuals, some people are setting up multiple identities to compartmentalize the information that's available to trackers.

Posted by: paul314 | February 19, 2010 11:43 AM | Report abuse

I, for one, welcome more targeted advertising. It beats the spam of TV commercials. It would be great if people could stop sending me a mountain of catalogs, when I have never ordered anything from a catalog, and never will. This doesn't require giving up much privacy, any more than entering ratings for movies you like in Netflix or books you like in Amazon so that they can match it against users with similar preferences to suggest new entertainment does. Overall, item based collaborative filtering, is more effective than basing stuff on lists of "friends".

Posted by: staticvars | February 19, 2010 1:09 PM | Report abuse

It's worth noting, that Google et al don't really disclose what they do with your data. Sure, they have privacy policies, but they're so vague as to be difficult to get concrete ideas of what they're actually doing with your data.

The amount of data from mail, calendars, maps, etc. they can use to reconstruct your persona is huge. So the question in my mind is, even if you trust them now, do you trust them in the future? And if not, what recourse do you have?

Posted by: phil39 | February 19, 2010 1:42 PM | Report abuse

It seems to me also that your degree of privacy can only move in one direction - once you've gone on Facebook and joined a dozen groups, if you later decide to cancel your Facebook membership the privacy you have lost to advertisers is lost for good. So I think people should think very carefully about exactly how much privacy they want when they take steps toward living in public.

Posted by: randrewm | February 19, 2010 1:51 PM | Report abuse

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