Why There Really Is No Such Thing As a Free App (or Lunch)

April 13, 2017 Avani Desai

There was a quiet revolution that took place a while back within the marketing landscape. Investors were falling over themselves to invest in an idea known as ‘targeted marketing’ or ‘targeted advertising.’ If you’ve ever used Facebook, you’ll know exactly what I mean, as Facebook is one of the biggest users of targeted ads. On that site, if you leave your relationship status as single, you can bet you’ll be served up ads for dating sites. If you have “liked” anything to do with fashion, you’ll get ads for designer shoes, and so on. Targeted ads can be extremely annoying, and they also feel very intrusive. However, they are effective—almost twice as effective as non-targeted ads, in fact.

The concept of placing ads within software applications is not actually new. Software applications often included ‘adware’ as part of their package; even way back in the early 90s, adware was often an expected part of our software use. It meant that software could be free or very cheap to purchase, but the actual cost came later in putting up with ads for other software that would pop up while using your purchase. Of course, this was before the Internet, and so the ads you saw were generic – targeted marketing was a mere twinkle in a marketer’s eye in those days, as without the collection of a consumer’s personal information, there can be no targeting.

Fast-forward to today and the global invasion of the Internet. The old adware of yesterday has evolved, and we have effectively created a monster through Internet based / big data marketing. These days, it is nigh on impossible to visit an e-commerce site without the last thing you browsed being replayed to you as you visit another site. It is as if we are being chased around the Internet by the ghosts of previous purchases – it really is creepy tech.

The idea of targeting an audience when placing an ad is, of course, as old as advertising itself. If you ever watched the hit TV series ‘Mad Men,’ you’ll know how important it has always been to focus on your audience and get the right ad in the right place. That being said, marketing a product to people who truly want that product is the proverbial golden chalice in the advertising industry. A seminal paper, written in 2005 by Berkeley University, called “The Targeting of Advertising,” looked at precision marketing and the importance to the industry for targeting your ads. It concluded that directing your ads at those who are actually interested in your product was the best way to spend your marketing money.

That simple conclusion has spawned a multi-billion-dollar industry dedicated to creating and storing those consumer preferences. These days, mobile and online apps (such as Shutterfly) now upload our personal information to cloud-held knowledge bases, which are then used by advertisers for marketing and sales purposes. These cloud stores of consumer data are becoming normalized - Gartner is predicting that by 2016, 36% of U.S. consumers will have personal data in the cloud. Additionally in the U.S., spending on these mobile-based ads is expected to reach $30.3 billion.  With the use of this information, cloud-based big data has given marketers the tools to truly exploit our interests and wants.

In a survey by Accenture, they asked over 600 global businesses if their companies collected personal data directly from individuals. 70% admitted they do use multiple channels, such as online accounts and mobile devices, because collecting data benefits their business greatly for a myriad of reasons, including building user profiles and predicting future purchases. 

Oh Look, a Free App!

In 2013, a report by Arxan showed that over 92 billion free apps were downloaded. This figure is expected to rise to almost 254 billion in 2017. That’s a lot of free lunches. But are these apps truly ‘free?’

Free apps need to be monetized in some way; after all, app developers aren’t creating them for charitable reasons, as they too must make a living. However, if they can’t sell their creation, that doesn’t mean it’s worthless as a free app—the data collected by the app has its own intrinsic value. The type of personal data that these apps are collecting includes personally identifying information, such as name, address, email address and so on, as well as demographic information, geo-location and user behavior.

Fitness apps are a case in point. For instance, the app ‘Moves,’ collects information on your daily physical activities, such as walking, jogging, biking--that sort of thing. Using GPS or Wi-Fi, it tracks your location throughout the day as you perform these activities. Seemingly harmless, until Moves was purchased by Facebook, and the worry became that, as the new owners of this fitness app, they would be able to access and link to your personal details, including your real-time location, and share it with others. At the time that Facebook purchased Moves, they denied this would ever happen, but then, in May of 2014, the Moves privacy policy was changed to allow a user’s data to be shared with affiliates. In the new policy, it currently states that:

“We may share information, including personally identifying information, with our Affiliates.”

This type of attitude towards personal data privacy is not uncommon in the world of apps. This year, researchers found 256 apps in the Apple store that don’t follow the Apple privacy guidelines and were still downloaded by at least 1 million people.

Can We Have Our Marketing Cake and Eat It Too?

The thing is, the information collected can be extremely useful, for us as well as the marketers. In principle, there is nothing wrong in being told about a product; after all, we may well want to know about the best deals available are on that coffee maker, or that holiday in Hawaii. The problem arises when we are forced to view advertising we simply aren’t interested in, and how our personal data is used to do so. A study by Razorfish has found that 77% of mobile users consider mobile ads to be an invasion of their personal privacy. If marketers want to truly take advantage of targeted advertising, then they need to change this attitude among consumers.

One possible way of changing attitudes towards targeted ads is by using managed consent. If I tell a company I am happy to find out about a particular product I am interested in and I am happy to hear about offers and related products, then fair enough--target those ads to me. But even with consent, privacy may not always be respected. That being said, the idea that companies today assume consent to share our information with third parties is plain wrong.  Privacy policies need to be more user-centric; at the moment, many of them are there to protect the app manufacturer, not the app user. This current situation of ambiguous consent does not need to exist; balanced privacy rights are perfectly capable of being applied. Technologists are making strides in this area through applications such as ‘personal data stores’ that handle consent and protocols such as UMA (User Managed Access). As marketing continues to evolve, and so too does the approach to ads and the concern for privacy, maybe one day we will be able to have our privacy cake and eat it too.

About the Author

Avani Desai

Avani Desai is the President at Schellman. Avani has more than 15 years of experience in IT attestation, risk management, compliance and privacy. Avani’s primary focus is on emerging healthcare issues and privacy concerns for organizations. Named as one of the 2017 Global Leaders in Consulting by Consulting Magazine she has also been featured and published in the ISSA Journal, ITSP Magazine, ISACA Journal, Information Security Buzz, Healthcare Tech Outlook, and many more. Avani also sits on the board of Catalist, a not for profit that empowers women by supporting the creation, development and expansion of collective giving through informed grantmaking. In addition, she is co-chair of 100 Women Strong, a female only venture philanthropic fund to solve problems related to women and children in the community.

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