Designing a New Value Proposition for Consumer Location Data

In a paper published earlier this month, a group of researchers tried to put a price tag on the personally identifiable information that flows from our mobile devices. The results indicated some of the unique challenges facing companies interested in mining a consumer’s location data, and the divergent paths of two tech companies that have built a businesses around the information.

In the study, researchers from the University of Trento, in Italy, and Google gave sixty participants a modified smartphone that stored information about the user’s call volume, application usage, the times and places of photos taken, and their location throughout the day. The researchers then asked each user to place a price tag on each type of data, the lowest of which in each category would be sold to the lab for its own use.

The conclusion shouldn’t surprise anyone: the researchers found that participants routinely placed the highest price tag on their location data, well-above information about call, media or app usage. What’s more, nearly a quarter of the time respondents went out of their way to place extremely high bids in order to ensure that their location data would not be shared regardless of the price.

The report also found that we tend to think differently about location data than interest or behavior online or application usage. Respondents said they tended to view location data more conservatively largely because spatial information could identify their person whereas other types of data simply suggest an interest or digital habit. The concerns are backed up by findings in other studies that suggest that even anonymized location data can point to a specific individual.

For years, I’ve listened as entrepreneurs frame the act of sharing one’s location as the next iteration in our inevitable march toward openness. “Ten years ago, no one would put their friends online, now everyone’s doing it,” the refrain went. “It’s the same with location.” But, the past few years have shown that information about what we do in the physical world may follow a much different trajectory.

A new phase calls for a new model
Foursquare’s big spinoff of its location sharing features has not taken off as planned. According to data from AppAnnie, the new app Swarm, which passively shares a consumers general location with other users, ranks somewhere in the mid-600’s among Apple AppStore downloads — well off of a high of 52nd in the days after its May launch. While its rankings jump after each new release, and the subsequent press coverage, those blips are getting smaller and smaller each time.

The question for Foursquare has always been one of value exchange: what do consumers get in return for sharing their whereabouts with the service and its other users? The decision to spin these features off was a tacit admission by the company’s leadership that the current value exchange had become more of a liability than an asset for Foursquare’s relatively new search business. It was also a recognition that the formula that worked for Facebook to convince users to bring their social lives online likely wouldn’t fly with real-world activities.

As Foursquare has struggled forward, another startup has built a big business collecting consumer location data. Earlier this week, Placed, a company that uses Nielsen-like panels to help advertisers measure the effectiveness of advertising in the physical world, announced some impressive growth figures. The company now measures the whereabouts of one in every 1,000 U.S. adults through a mobile application that runs passively on panelists’ phones.

The company, which raised $10 million earlier this summer, has tailored its value exchange to the unique concerns people have about location data. It promises anonymity, security and a clear (financial) incentive. Today, the company collects over 200 million locations a day. (Using some basic back-of-the-napkin math, that means the company could double Foursquare’s 6 billion check-in dataset every month.)

The point being that the free-service-in-return-for-data exchange, which has powered the consumer technology industry for decades, might not be the most effective way to build a location data business. The internet is undergoing a paradigm shift, moving from an ancillary service that we use as a tool, to the foundational infrastructure on which we run our lives. Consequently, the unregulated and largely unknown environment in which consumer data is bought and sold today must change. There’s a viable opportunity, and need, to create a direct marketplace for consumer data.

Steven Jacobs is Street Fight’s deputy editor.