Free email services are a prime example. Microsoft’s Outlook.com boasts 400 million active users, while Google’s free Gmail service reports 900 million active users. These services are incredibly expensive to operate, making even the largest corporate email systems seem tiny by comparison. Some users complain bitterly about the ads and use software to block them. They also express concern, or even outrage, that supposedly private email content may be used to target them.
Social media companies perhaps provide the best insight into just how willing users are to trade privacy for services. Facebook, LinkedIn, and Twitter have established themselves as the leading social networks by dominating different segments of the market.
Facebook, with more than 1.5 billion monthly active users, is primarily focused on networking with family and friends. In the company’s words, “Founded in 2004, Facebook’s mission is to give people the power to share and make the world more open and connected. People use Facebook to stay connected with friends and family, to discover what’s going on in the world, and to share and express what matters to them.”
Facebook reported US $12.5 billion of revenue in 2014, 92 per cent of which was from advertising. The company is of particular interest to advertisers because ads can be targeted based on information shared by users such as age, gender, location, education, work history or specific interests. Advertisers can create Facebook Pages to engage with customers and highlight a user’s connection with a brand or business through the ‘like’ feature.
LInkedIn is designed for business networking. The culture of the site encourages interaction on business and profession-related discussions. Unlike Facebook, the company offers both free and paid accounts, the key differentiator being that users who pay are granted wider access to the online community. For example, a Premium LinkedIn user can directly contact users outside of their network, while a standard (free) account holder would have to request an introduction via another user.
LinkedIn’s revenue model is more diversified. According to the company, LinkedIn has over 400 million registered users, but only 25% use the service monthly, suggesting an active user base of about 100 million. The company reported US $2.2 billion of revenue in 2014; 20 per cent from premium subscriptions, 20 per cent from marketing solutions, and 60 per cent from talent solutions (employee recruitment).
Twitter, despite enhancements such as URL shortening and photo sharing, essentially remains a 140-character micro-blogging tool. Users opt-in to receive and send very brief content (tweets) with others. This functionality is very limited compared to Facebook and LinkedIn, but those limits serve to differentiate the platform. The use of Twitter spans a wide gamut of activities ranging from personal blogging to real-time reporting and online customer service.
According to the company, Twitter has 320 million active monthly users. The company reported 2014 revenues of US $1.4 billion, of which 90% was from advertising and the remainder from “data licensing and other.” Twitter allows advertisers to target ads based on followers, keywords, email addresses, geography and demographic characteristics. Examples on Twitter’s site include, “a speaker targets users who follow conference handles with ads linking to their blog,” an “outdoor equipment and travel company targets users who are Tweeting about vacation plans with ads featuring a Twitter-exclusive discount code,” and “a fashion company sets up conversion tracking and targets users who place items in their cart with ads reminding them they’re just one step away.”
These “free” services may not have a cost in dollars and cents, but to remain financially viable the companies must continuously improve how they monetize the information users share with them. They walk a fine line between not alienating users and generating value for shareholders. These firms have a clear economic imperative to provide only the minimum privacy controls required to meet legislative and contractual obligations, and they are free to change their contract with users at any time.
In 2014, Facebook, LinkedIn, and Twitter earned a combined US $16.1 billion in revenues with an aggregate of 1.9 billion active monthly accounts. This equates to an average revenue of about US $8.47 per active account. Is privacy really worth less than ten bucks?
As Andrew Lewis (@andlewis) tweeted:
If you are not paying for it, you’re not the customer; you’re the product being sold.
— Andrew Lewis (@andlewis) September 13, 2010
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