How does the Internet make profits through personal data?


Like it or not – and it’s entirely possible that this is a big “no” – these services will continue to exist, and we may be “forced ” to continue using them. Some of the privacy concerns that lead people to say “stop using them” are well-founded. However, the reality is not so simple.

For example, in many remote areas, Facebook or Twitter may be the only free Internet access people have. Due to restrictions on press freedom, social media is often the only source of “truth” for some users. In some areas, people can get unlimited Facebook access when they recharge their phones. If they are at work, they will almost always use Facebook Messenger or other social media chat tools to stay in touch rather than exhaust their SMS allowance.

Many of us can afford to give up these services; but just as many of us simply can’t consider it when there’s nothing else to replace it.

Mining data (for money) has never been more lucrative.

Mining data

But how did this come about? In the early days of Facebook, it was hard to imagine the platform being used to spread disinformation, aid genocide, or sell user data to third parties. We walk users through the social media business model and show how the inevitable happens: when the product is free, the commodity is you and your data.

Building a social media store

Building a social media store

Often, venture capital support is how social networks come to life. This is where venture capital firms put a lot of money into what looks like a promising service/technology with the expectation that they will make a lot of money and get a return on their investment in the form of ownership shares. When the company gets acquired or goes public, it’s a big chunk of cash for everyone involved. (Well, that’s the dream. Reality is usually much more complicated).

The rewards of these high-risk gambles are uncommon, and it often happens that the company never quite catches on. They underperform, or key employees leave, they expand a little too fast, and the knock-on effect is that the CEO suddenly has this massive service with millions of users and no smart way to turn that user base into profits (and no way to retain an order-filled mess of a service).

At that point, they either had to get by or look for other ways to make a profit. That “other way” is almost always through user data. I mean, it’s all there, so why not? Here are some of the ways social networks are turning bums on seats into lots of cash.

Ads on social media

Ads on social media

This is the most obvious one and has been a major driver of online revenue for years. Social media platforms tend to benefit in ways not available to other, more traditional publishers, and the revenue stream seems to be quite healthy in terms of user-generated revenue.

Advertising is a direct way for social media networks to not only make money from the data they collect, but also to create chains where outside parties may also enter the same pool.

At the most basic level, platforms can provide advertising space for advertisers. Unlike traditional publishing, social media advertising can be tailored to the personalized data that social networks see you searching, talking about or liking on a daily basis. If you think clicking “like” (or similar words) on a portal is just a thumbs up in the general direction of the person providing the content, think again. It’s likely that the data is feeding into the “these are the ads we should show this person” cauldron.

Not only is everything you type into your social networks (and your browser) available, but everything your colleagues and co-workers do is available, tying you into a social media profile. All of this can then be mined for correlation and estimation, which will also feed back to the ad unit and ultimately be profitable.

Guesses are based on the interests of you, your family, your friends and your friends’ friends, as well as other demographic-specific cues such as your job title, your family photos, travel experiences, car and marital status. Probably all of these data points help social networks subtly estimate your revenue, which is another way to determine which specific ads to send.

After all, if they send you the wrong ad, they lose. If you don’t click and a promotion page pops up, the advertiser isn’t really winning. Unless you’re forced to use it in some way, all that advertising investment is essentially wasted.

Even your data can be sold to advertisers or other marketing companies. Depending on the terms of service, it is entirely possible for the social platforms you use to anonymize their treasure trove and sell it to third parties at a premium. Even in cases where data is not sold, it is always a bit risky to simply leave it there.

There are many unrelated, non-social media examples that prove that so-called anonymized data is not the case. There are always people who can piece them together after the fact, and they don’t have to be Sherlock Holmes to do it. All of this is not immune to the dangers of theft, leakage and data grabs until you consider a social media site/platform with a social component.

Any cursory security news source will tell you that there are plenty of rogue advertisers out there to offset the perfectly legitimate ones. Whether by purchase or by stumbling upon leaked data online, scammers are happy to take social media data and bundle it in email/phone scams and other fake promotions. At this point, even data generated through theoretically legitimate means is somehow (mis)used by unethical individuals, which only further damages the advertising industry.

Apps and advertising

Apps and advertising

Apps and advertising
Moving from desktop to mobile is a smart move for social networks, and if they can get you to install apps, then (for them) all the better. Depending on the mobile platform, they may be able to collect additional information about sites, applications, services and preferred features that may not always be available if you are only using a mobile web browser.

If you’ve been browsing on a mobile device for any length of time, you’re almost certainly familiar with the endless pop-ups and push notifications telling you how cool and awesome an app version of site X or Y will be. You may also have experienced the annoying feeling that a website’s functionality on a mobile browser seems to degrade over time.

All of a sudden, the user interface has gotten worse. The text is tiny. Somehow, you can no longer find the menu options that were previously public. Certain types of content no longer display correctly or easily, even if it’s as basic as a jpeg. “Do you want to view this in the application?” Yes and No buttons pop up in the opposite position from the last time you saw it? Are they trying to trick you into clicking on the wrong thing? It’s hard to remember, isn’t it?

The cynic would say this fits the course criteria perfectly, but it’s almost certainly something you’ve experienced when trying to do anything in the social sphere on a mobile device, not an app.

Once you’re locked into said app, a brave new world emerges with very detailed data collection and a plethora of available ads. Some of these may lead to sponsored affiliate links that further open the data collection network or lead to additional third-party downloads. Some of these may be located on official platform stores, while others may be located on unofficial third-party websites, all of which imply such risks.

Even the settings for how an application works properly on a website can increase revenue. Back in 2008, Facebook was in the spotlight for its $375 developer fee. Simply having a large number of developers develop applications for the platform – verified or not – generates data that the social networking platform can use and then associate it with users.It’s all your data, spinning around in a tumble dryer of analytics.Even the settings for how an application works properly on a website can increase revenue. Back in 2008, Facebook was in the spotlight for its $375 developer fee. Simply having a large number of developers develop applications for the platform – verified or not – generates data that the social networking platform can use and then associate it with users.

Access/featured payments

Access/featured payments

Gated access to the site behind the paywall is not particularly popular with the public. As a result, most sites with a social networking component will typically only charge for additional services that may not even be directly related to the social networking bit.

LinkedIn is a good example: the social networking component is available to anyone, as it makes all those really bad road warrior lifestyle posts really sticky, and humorous replies are usually how people first log on to a profile. However, the price you pay is the addition of core features that have nothing to do with “Is this true?” Irrelevant core features. Comedic posts elsewhere.

In the social networking space, some platforms require a non-payment gating method. Orkut, for example, requires a login to access any content. Some believe that closed communities keep bad things out. In reality, when the data theft worm began to spread, it simply meant that the attack was confined to the fence and hit the closed community with full force.

The knock-on effect is that the ability of security researchers to analyze and respond to these threats is delayed because many of these services are either niche services or only applicable to certain regions. As a result, spotting these attacks is often just a matter of being told by random people that “X happened on Y”.

Today, access is more granular and users can display what they want, while other content requires you to log in to view it.

Calculating Costs

Calculating Costs

Of the three methods listed above, payment/gating is one of the least popular techniques for encouraging revenue streams. Straightforward traditional advertising isn’t as fancy as app/website/service integration, but it’s available to almost anyone, which is handy for developers who don’t have the mobile technology or money to help make it happen.

Even so, nothing compares to the flexibility, integrated advertising, and potential for additional third-party installs that mobile apps offer. With the pull of social media influencers adding sticky installs, it has probably never been more difficult to resist clicking on an install to capture key demographics.

So, the most important question becomes one of the most common: What will be the payoff for loading apps onto the phone?

This has always been true for apps, and it will continue to be a key factor in social media mobile data mining for the foreseeable future. “You are the product” may be a bit long at this point, but in the case of social media, it’s absolutely accurate. Billions of people around the world create all the content that is posted, so how could it be anything else?

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