LGI report shows multi-billion benefit of data sharing in jeopardy

November 9, 2012 10.19 Europe/London By Renagh Christopher

The commercial use of personal data is potentially of huge economic value, with a new Liberty Global report saying that “at a 22% annual growth rate, applying personal data can deliver a €330 billion annual economic benefit for organisations by 2020”.

The interational cable operator has released its report The Value of Digital Identity as a response to the EU Proposal for the Regulation on General Data Protection.

It comes as a quarter of the world’s population is predicted to be a member of on online social network by 2015.

At a roundtable in Brussels this week, John Rose, Senior Partner & MD of The Boston Consulting Group, which researched the report, indicated that roughly €50 billion was the current monetary benefit extracted by businesses and governments across Europe. The report places the potential consumer value of the trade in personal data at €670 billion, based on an exchange for free services, goods, convenience and time savings. However these potential economic benefits are highly sensitive, with up to two thirds in jeopardy, if stakeholders do not establish a trusted flow of data.

Manuel Kohnstamm, senior vice president and chief policy officer of Liberty Global, confirmed that 50% of customers for the Horizon product had opted in to allowing their data to be used to offer personalised services across the multimedia platform. A predictable result by the report’s finding that customers are prepared to “trade” in the currency of their personal data to achieve advantages such as free services, convenience and time savings.

The major contradiction revealed was that 88% of online users considered at least one industry a threat to their privacy but only 10% of respondents had ever done six or more of eight common privacy-protecting activities (eg disabling cookies, private browsing). This indicates a strong need to educate customers as to how to actively participate in minimizing the risk of their data being misused if the trusted flow of data is to be achieved.

Solutions discussed included perhaps passing off the necessary legal disclaimers and licences, that can run to 40 pages, from a simple six or seven point communication explaining to customers the actual use that will be made of their date to ensure informed decision making.

Unsurprisingly, businesses such as UPS, represented by Penelope Naas, are being very cautious about their data policies.

Kohnstamm also admitted even with a comprehensive compliance system there is never a 100% guarantee of adequate protection of customer data. Therefore there is a “need to protect customers from themselves”.

Sentiments from attendees, from organisations such as Facebook, indicated caution. The reputational risks of breaching customer “trust” are already well-documented and accepted. Research at Carnegie Mellon University that shows that Facebook has essentially become a worldwide photo identification database and therefore has particularly complex data issues.

John Rose said that Téléfonica underestimated this when it announced it was selling customer data before informing its customers, which provoked a backlash from unhappy German customers and swift revision of the policy.

Speaking in a private capacity, Constantijn van Oranje, deputy head of cabinet of EU commissioner Neelie Kroes, warned that companies needed to think carefully about making “the customer a product”.

Interestingly, this issue is not new. The business to business trade in personal data already underpinned models for businesses such as Reader’s Digest where about two thirds of its revenue came from selling on customer data to companies notably in the pharmaceutical sector. And who can forget that the success of Carole Middleton’s Party Pieces was not unrelated to a savvy appreciation of the business asset of customer data.

Whilst the projected value for the media and telco sector of personal data in 2020 is €19 billion, against a projected sector value of €270 billion, it is not the fastest mover in harnessing the advantages of the data explosion. The retail sector is, with highly targeted offers to shoppers being commonplace. However the stage where you pass a coffee shop and are instantly sent a discount on your mobile phone to purchase a coffee there, remains several regulatory and cultural steps away.