As Zynga Profits From Personal Data, Other Opportunities Abound

The debate that erupted last week over marketing offers within social games — namely, that third-party offers for virtual currency used by gamers include scams that trick people into unwanted subscriptions — shook the fast-growing social games sector: Its star, Zynga, changed its policies for third-party partners. Facebook, which hosts Zynga’s games, vowed to crack down on scammers. And the brash CEO of OfferPal — who was at the heart of this debate — was replaced by a new CEO, who promptly issued a mea culpa.

In the short term, there’s some resolution to the story, as the sunlight on this issue has provided some disinfectant. But longer term, things are going to get trickier. Social gaming companies like Zynga have demonstrated such success in monetizing social network users that their methods are bound to seep outside the virtual worlds of games to permeate the larger world of the social networks themselves. The real challenge will be learning all the pitfalls and hazards of using personal information increasingly as a form of currency.

This has been happening in some form for years, or course; has been selling airfare for a mix of cash and data for more than a decade. But increases in targeted advertising technology across multiple media (TV, mobile, PC) and a deluge of data being poured into social networks and search engines will lend unprecedented scale to the concept.

But consumers are still somewhat resistant to surrendering personal information in exchange for cash. In a recent survey by Peanut Labs, only 13 percent of social gamers said they preferred to buy virtual goods by submitting to special offers like the kind that have stirred controversy lately. More than 26 percent said they preferred to fill out market research questionnaires. And most, 60 percent, said they preferred to pay with direct payments (either credit or game cards or SMS payments).

For social game makers, any of those methods are good revenue generators. But for social networks, those results pose a nagging question: What good are the volumes of data they’ve been collecting from you for years if you’re just going to pay for things with real money?

The value of personal details relative to dollars is getting harder to ignore. For example, next year, Google is said to be introducing netbooks, following the path that several broadband providers have: subsidizing consumer purchases of netbooks in order to harvest the recurring broadband subscription fees that follow — or, in Google’s case, the advertising revenue that follows.

What should Google charge for a netbook? Its CEO, Eric Schmidt, has talked about putting Google’s own Chrome operating systems, for free, on netbooks that could cost 5-10 times less than they do today. How about just giving the netbooks away? Google is already the chief beneficiary of any web use. If netbook users agreed to surrender some information about themselves, it could well cover the cost of the hardware – a proposition that would hold particular appeal for those in developing nations without a lot of disposable income. Voila, you’ve purchased a computer with nothing but information about yourself.

To some extent, it’s frustrating to see middlemen in the marketing world making money off of my personal information, which makes me wonder: What if I had control over all of it, rather than Facebook or Google or the grocery store? What if I harnessed all my personal data myself and could control exactly how much I sold, to whom, and for how much? What if I could convert it to real dollars in a neutral exchange? It’s a strange currency, sure, because it includes things like personal tastes and opinions, so every time I change my mind, it could be like printing money. But it would encourage me to release much more information than I do today.

So who is going to create the massive data-crunching platform that will allow me to have complete control over my own personal data mine, the Bank of Me?

Question of the week

How will personal information best be used as currency?
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2 Comments Subscribers to comment
  1. To give you a better idea of the increasing monetary value of personal data, millions of mobile customers in the UK recently had their personal data stolen by rogue employees and sold to rival operators.

    And the authorities say fines for these crimes are no deterrent anymore because there’s so much money to be made selling personal data.

  2. Selling personal information for something virtual is a messy business. Your ideas about how this could extend to the real world are interesting and scary.

    I think an important part of this equation will be the value a user gets from sharing personal information. Rather than simply prostituting your behavior for money, getting a better personal and communal experience can be a big motivator.

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