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# Data and Goliath The Hidden Battles to Collect Your Data and Control Your World

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personal data for less than its worth.

This tendency to undervalue privacy is exacerbated by companies deliberately making sure that privacy is not salient to users. When you log on to Facebook, you don’t think about how much personal information you’re revealing to the company; you chat with your friends. When you wake up in the morning, you don’t think about how you’re going to allow a bunch of companies to track you throughout the day; you just put your cell phone in your pocket.

The result is that Internet companies can improve their product offerings to their actual customers by reducing user privacy. Facebook has done it systematically over the years, regularly updating its privacy policy to obtain more access to your data and give you less privacy. Facebook has also changed its default settings so that more people can see your name, photo, wall posts, photos you post, Likes, and so on. Google has done much the same. In 2012, it announced a major change: Google would link its data about you from search, Gmail, YouTube (which Google owns), Google Plus, and so on into one large data set about you.

Apple is somewhat of an exception here. The company exists to market consumer products, and although it could spy on iCloud users’ e-mail, text messages, calendar, address book, and photos, it does not. It uses iTunes purchase information only to suggest other songs and videos a user might want to buy. In late 2014, it started using this as a market differentiator.

Convenience is the other reason we willingly give highly personal data to corporate interests, and put up with becoming objects of their surveillance. As I keep saying, surveillance-based services are useful and valuable. We like it when we can access our address book, calendar, photographs, documents, and everything else on any device we happen to be near. We like services like Siri and Google Now, which work best when they know tons about you. Social networking apps make it easier to hang out with our friends. Cell phone apps like Google Maps, Yelp, Weather, and Uber work better and faster when they know our location. Letting apps like Pocket or Instapaper know what we’re reading feels like a small price to pay for getting everything we want to read in one convenient place. We even like it when ads are targeted to exactly what we’re interested in. The benefits of surveillance in these and other applications are real, and significant.

We especially don’t mind if a company collects our data and uses it within its own service to better serve us. This is why Amazon recommendations are rarely mentioned when people complain about corporate surveillance. Amazon constantly recommends things for you to buy based on the things you’ve bought and the things other people have bought. Amazon’s using your data in the same context it was collected, and it’s completely transparent to the user. It’s very big business for Amazon, and people largely accept it. They start objecting, though, when their data is bought, sold, and used without their knowledge or consent.

THE DATA BROKER INDUSTRY

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Customer surveillance is much older than the Internet. Before the Internet, there were four basic surveillance streams. The first flowed from companies keeping records on their customers. This was a manufacturing supply company knowing what its corporate customers order, and who does the ordering. This was Nordstrom remembering its customers’ sizes and the sorts of tailoring they like, and airlines and hotels keeping track of their frequent customers. Eventually this evolved into the databases that enable companies to track their sales leads all the way from initial inquiry to final purchase, and retail loyalty cards, which offer consumers discounts but whose real purpose is to track their purchases. Now lots of companies offer Customer Relationship Management, or CRM, systems to corporations of all sizes. The second traditional surveillance stream was direct marketing. Paper mail was the medium, and the goal was to provide companies with lists of people who wanted to receive the marketing mail and not waste postage on people who did not. This was necessarily coarse, based on things like demographics, magazine subscriptions, or customer lists from related enterprises. The third stream came from credit bureaus. These companies collected detailed credit information about people, and sold that information to banks trying to determine whether to give individuals loans and at what rates. This has always been a relatively expensive form of personal data collection, and only makes sense when lots of money is at stake: issuing credit cards, allowing someone to lease an apartment, and so on. The fourth stream was from government. It consisted of various public records: birth and death certificates, driver’s license records, voter registration records, various permits and licenses, and so on. Companies have increasingly been able to download, or purchase, this public data. Credit bureaus and direct marketing companies combined these four streams to become modern day data brokers like Acxiom. These companies buy your personal data from companies you do business with, combine it with other information about you, and sell it to companies that want to know more about you. And they’ve ridden the tides of computerization. The more data you produce, the more they collect and the more accurately they profile you. The breadth and depth of information that data brokers have is astonishing. They collect demographic information: names, addresses, telephone numbers, e-mail addresses, gender, age, marital status, presence and ages of children in household, education level, profession, income level, political affiliation, cars driven, and information about homes and other property. They collect lists of things you’ve purchased, when you’ve purchased them, and how you paid for them. They keep track of deaths, divorces, and diseases in your family. They collect everything about what you do on the Internet. Data brokers use your data to sort you into various marketable categories. Want lists of people who fall into the category of “potential inheritor” or “adult with senior parent,” or addresses of households with a “diabetic focus” or “senior needs”? Acxiom can provide you with that. InfoUSA has sold lists of “suffering seniors” and gullible seniors. In 2011, the data broker Teletrack sold lists of people who had applied for nontraditional credit

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products like payday loans to companies who wanted to target them for bad financial deals. In 2012, the broker Equifax sold lists of people who were late on their mortgage payments to a discount loan company. Because this was financial information, both brokers were fined by the FTC for their actions. Almost everything else is fair game.

PERSONALIZED ADVERTISING

We use systems that spy on us in exchange for services. It’s just the way the Internet works these days. If something is free, you’re not the customer; you’re the product. Or, as Al Gore said, “We have a stalker economy.”

Advertising has always suffered from the problem that most people who see an advertisement don’t care about the product. A beer ad is wasted on someone who doesn’t drink beer. A car advertisement is largely wasted unless you are in the market for a car. But because it was impossible to target ads individually, companies did the best they could with the data they had. They segmented people geographically, and guessed which magazines and TV shows would best attract their potential customers. They tracked populations as a whole, or in large demographic groups. It was very inefficient. There’s a famous quote, most reliably traced to the retail magnate John Wanamaker: “I know half of my advertising is wasted. The trouble is, I don’t know which half.”

Ubiquitous surveillance has the potential to change that. If you know exactly who wants to buy a lawn mower or is worried about erectile dysfunction, you can target your advertising to the right person at the right time, eliminating waste. (In fact, a national lawn care company uses aerial photography to better market its services.) And if you know the details about that potential customer—what sorts of arguments would be most persuasive, what sorts of images he finds most appealing—your advertising can be even more effective.

This also works in political advertising, and is already changing the way political campaigns are waged. Obama used big data and individual marketing to great effect in both 2008 and 2012, and other candidates across parties are following suit. This data is used to target fund-raising efforts and individualized political messages, and ensure that you actually get to the polls on Election Day—assuming the database says that you’re voting for the correct candidate.

A lot of commercial surveillance data is filled with errors, but this information can be valuable even if it isn’t very accurate. Even if you ended up showing your ad to the wrong people a third of the time, you could still have an effective advertising campaign. What’s important is not perfect targeting accuracy; it’s that the data is enormously better than before.

For example, in 2013, researchers were able to determine the physical locations of people on Twitter by analyzing similarities with other Twitter users. Their accuracy rate wasn’t perfect—they were only able to predict a user’s city with 58% accuracy—but for plenty of commercial advertising that level of precision is good enough.

Still, a lot of evidence suggests that surveillance-based advertising is oversold. There

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is value in showing people ads for things they want, especially at the exact moment they are considering making a purchase. This is what Google tries to do with Adwords, its service that places ads next to search results. It’s what all retailers try to do with “people who bought this also bought this” advertising. But these sorts of things are based on minimal surveillance. What’s unclear is how much more data helps. There is value in knowing broad personal details about people: they’re gay, they’re getting married, they’re thinking about taking a tropical vacation, they have a certain income level. And while it might be very valuable for a car company to know that you’re interested in an SUV and not a convertible, it’s only marginally more valuable to know that you prefer the blue one to the green one. And it’s less valuable to know that you have two kids, one of whom still needs a car seat. Or that one of the kids died in a car crash. Yes, a dealer would push the larger SUV in the first instance and tout safety in the second, but there are diminishing returns. And advertising that’s too targeted feels creepy and risks turning customers off. There’s a concept from robotics that’s useful here. We tend to be comfortable with robots that obviously look like robots, and with robots that appear fully human. But we’re very uncomfortable with robots that look a lot like people but don’t appear fully human. Japanese roboticist Masahiro Mori called this phenomenon the “uncanny valley.” Technology critic Sara M. Watson suggested that there’s a similar phenomenon in advertising. People are okay with sloppily personalized advertising and with seamless and subtle personalized advertising, but are creeped out when they see enough to realize they’re being manipulated or when it doesn’t match their sense of themselves. This is all going to change over time, as we become used to personalized advertising. The definition of “creepy” is relative and fluid, and depends a lot on our familiarity with the technologies in question. Right now, ads that follow us around the Internet feel creepy. Creepy is also self-correcting. Google has a long and complex policy of impermissible search ads, because users found some types of advertising too creepy. Other companies are letting people click on a link to find out why they were targeted for a particular ad, hoping that that will make them more comfortable with the process. On the other hand, some companies just hide it better. After the story ran about Target figuring out that the teenager was pregnant, the company changed the way it sent targeted advertising to people. It didn’t stop advertising to women it thought were pregnant, but it embedded those targeted ads among more general ads. Recipients of these mailings didn’t feel targeted, so they were less creeped out by the advertisements. Meanwhile, the prevalence of advertising in our environment is making individual ads less valuable for two reasons. First, as advertising saturates our world, the value of each individual ad falls. This is because the total amount of money we have to spend doesn’t change. For example, all automobile manufacturers are fighting for the profit from the one car you will buy. If you see ten times the ads, each one is only worth one tenth the price, because in the end you’re only going to buy one car. Second, we are better at tuning advertising out. Since the popularization of analog video recorders in the mid-1970s, television advertisers have paid attention to how their

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ads look in fast-forward, because that’s how many people watch them. Internet advertising has waged an even more complex battle for our attention. Initially, ads were banners on the top of pages. When we learned how to ignore them, the advertisers placed their ads in the main parts of the pages. When we learned to ignore those, they started blinking and showing video. Now they’re increasingly interfering with what we want to read, so we need to deliberately shoo them away. More than 50 million people have installed AdBlock Plus on their browsers to help them do this.

The result is that the value of a single Internet advertisement is dropping rapidly, even as the cost of Internet advertising as a whole is rising. Accordingly, the value of our data to advertisers has been falling rapidly. A few years ago, a detailed consumer profile was valuable; now so many companies and data brokers have the data that it’s a common commodity. One analysis of 2013 financial reports calculated that the value of each user to Google is \$40 per year, and only \$6 to Facebook, LinkedIn, and Yahoo. This is why companies like Google and Facebook keep raising the ante. They need more and more data about us to sell to advertisers and thereby differentiate themselves from the competition.

It’s possible that we’ve already reached the peak, and the profitability of advertising as a revenue source will start falling, eventually to become unsustainable as a sole business model. I don’t think anyone knows how the Internet would look if the advertising bubble burst, surveillance-based marketing turned out not to be effective, and Internet companies needed to revert to more traditional business models, like charging their users.

NEW MIDDLEMEN CONSOLIDATE POWER

One of the early tropes of the Internet was that it would eliminate traditional corporate middlemen. No longer would you have to rely on a newspaper to curate the day’s news and provide it to you in an easy-to-read paper package. You could go out and design your own newspaper, taking bits from here and there, creating exactly what you wanted. Similarly, no longer would you have to rely on centralized storefronts to accumulate and resell collectibles; eBay connected buyers and sellers directly. It was the same with music promotion and distribution, airline tickets, and—in some cases—advertising. The old gatekeepers’ business models relied on inefficiencies of technology, and the Internet changed that dynamic.

It’s even more true today. AirBnB allows individuals to compete with traditional hotel chains. TaskRabbit makes it easier to connect people who want to do odd jobs with people who need odd jobs done. Etsy, CafePress, and eBay all bypass traditional flea markets. Zillow and Redfin bypass real estate brokers, eTrade bypasses investment advisors, and YouTube bypasses television networks. Craigslist bypasses newspaper classifieds. Hotwire and Travelocity bypass travel agents.

These new companies might have broken the traditional power blocs of antique stores, newspapers, and taxi companies, but by controlling the information flow between buyers and sellers they have become powerful middlemen themselves. We’re increasingly seeing new and old middlemen battle in the marketplace: Apple and its iTunes store versus the

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music industry, Amazon versus the traditional publishing industry, Uber versus taxi companies. The new information middlemen are winning.

Google CEO Eric Schmidt said it: “We believe that modern technology platforms, such as Google, Facebook, Amazon and Apple, are even more powerful than most people realize … , and what gives them power is their ability to grow—specifically, their speed to scale. Almost nothing, short of a biological virus, can scale as quickly, efficiently or aggressively as these technology platforms and this makes the people who build, control, and use them powerful too.”

What Schmidt is referring to is the inherently monopolistic nature of information middlemen. A variety of economic effects reward first movers, penalize latecomer competitors, entice people to join the largest networks, and make it hard for them to switch to a competing system. The result is that these new middlemen have more power than those they replaced.

Google controls two-thirds of the US search market. Almost three-quarters of all Internet users have Facebook accounts. Amazon controls about 30% of the US book market, and 70% of the e-book market. Comcast owns about 25% of the US broadband market. These companies have enormous power and control over us simply because of their economic position.

They all collect and use our data to increase their market dominance and profitability. When eBay first started, it was easy for buyers and sellers to communicate outside of the eBay system because people’s e-mail addresses were largely public. In 2001, eBay started hiding e-mail addresses; in 2011, it banned e-mail addresses and links in listings; and in 2012, it banned them from user-to-user communications. All of these moves served to position eBay as a powerful intermediary by making it harder for buyers and sellers to take a relationship established inside of eBay and move it outside of eBay.

Increasingly, companies use their power to influence and manipulate their users. Websites that profit from advertising spend a lot of effort making sure you spend as much time on those sites as possible, optimizing their content for maximum addictiveness. The few sites that allow you to opt out of personalized advertising make that option difficult to find. Once companies combine these techniques with personal data, the result is going to be even more insidious.

Our relationship with many of the Internet companies we rely on is not a traditional company–customer relationship. That’s primarily because we’re not customers. We’re products those companies sell to their real customers. The relationship is more feudal than commercial. The companies are analogous to feudal lords, and we are their vassals, peasants, and—on a bad day—serfs. We are tenant farmers for these companies, working on their land by producing data that they in turn sell for profit.

Yes, it’s a metaphor—but it often really feels like that. Some people have pledged allegiance to Google. They have Gmail accounts, use Google Calendar and Google Docs, and have Android phones. Others have pledged similar allegiance to Apple. They have iMacs, iPhones, and iPads, and let iCloud automatically synchronize and back up

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everything. Still others of us let Microsoft do it all. Some of us have pretty much abandoned e-mail altogether for Facebook, Twitter, and Instagram. We might prefer one feudal lord to the others. We might distribute our allegiance among several of these companies, or studiously avoid a particular one we don’t like. Regardless, it’s becoming increasingly difficult to not pledge allegiance to at least one of them.

After all, customers get a lot of value in having feudal lords. It’s simply easier and safer for someone else to hold our data and manage our devices. We like having someone else take care of our device configurations, software management, and data storage. We like it when we can access our e-mail anywhere, from any computer, and we like it that Facebook just works, from any device, anywhere. We want our calendar entries to automatically appear on all of our devices. Cloud storage sites do a better job of backing up our photos and files than we can manage by ourselves; Apple has done a great job of keeping malware out of its iPhone app store. We like automatic security updates and automatic backups; the companies do a better job of protecting our devices than we ever did. And we’re really happy when, after we lose a smartphone and buy a new one, all of our data reappears on it at the push of a button.

In this new world of computing, we’re no longer expected to manage our computing environment. We trust the feudal lords to treat us well and protect us from harm. It’s all a result of two technological trends.

The first is the rise of cloud computing. Basically, our data is no longer stored and processed on our computers. That all happens on servers owned by many different companies. The result is that we no longer control our data. These companies access our data—both content and metadata—for whatever profitable purpose they want. They have carefully crafted terms of service that dictate what sorts of data we can store on their systems, and can delete our entire accounts if they believe we violate them. And they turn our data over to law enforcement without our knowledge or consent. Potentially even worse, our data might be stored on computers in a country whose data protection laws are less than rigorous.

The second trend is the rise of user devices that are managed closely by their vendors: iPhones, iPads, Android phones, Kindles, ChromeBooks, and the like. The result is that we no longer control our computing environment. We have ceded control over what we can see, what we can do, and what we can use. Apple has rules about what software can be installed on iOS devices. You can load your own documents onto your Kindle, but Amazon is able to delete books it has already sold you. In 2009, Amazon automatically deleted some editions of George Orwell’s Nineteen Eighty-Four from users’ Kindles because of a copyright issue. I know, you just couldn’t write this stuff any more ironically.

Even the two big computer operating systems, Microsoft’s Windows 8 and Apple’s Yosemite, are heading in this direction. Both companies are pushing users to buy only authorized apps from centralized stores. Our computers look more like smartphones with every operating system upgrade.

It’s not just hardware. It’s getting hard to just buy a piece of software and use it on your computer in any way you like. Increasingly, vendors are moving to a subscription model—Adobe did that with Creative Cloud in 2013—that gives the vendor much more control. Microsoft hasn’t yet given up on a purchase model, but is making its MS Office subscription very attractive. And Office 365’s option of storing your documents in the Microsoft cloud is hard to turn off. Companies are pushing us in this direction because it makes us more profitable as customers or users.

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Given current laws, trust is our only option. There are no consistent or predictable rules. We have no control over the actions of these companies. I can’t negotiate the rules regarding when Yahoo will access my photos on Flickr. I can’t demand greater security for my presentations on Prezi or my task list on Trello. I don’t even know the cloud providers to whom those companies have outsourced their infrastructures. If any of those companies delete my data, I don’t have the right to demand it back. If any of those companies give the government access to my data, I have no recourse. And if I decide to abandon those services, chances are I can’t easily take my data with me.

Political scientist Henry Farrell observed, “Much of our life is conducted online, which is another way of saying that much of our life is conducted under rules set by large private businesses, which are subject neither to much regulation nor much real market competition.”

The common defense is something like “business is business.” No one is forced to join Facebook or use Google search or buy an iPhone. Potential customers are choosing to enter into these quasi-feudal user relationships because of the enormous value they receive from them. If they don’t like it, they shouldn’t do it.

This advice is not practical. It’s not reasonable to tell people that if they don’t like the data collection, they shouldn’t e-mail, shop online, use Facebook, or have a cell phone. I can’t imagine students getting through school anymore without Internet search or Wikipedia, much less finding a job afterwards. These are the tools of modern life. They’re necessary to a career and a social life. Opting out just isn’t a viable choice for most of us, most of the time; it violates what have become very real norms of contemporary life.

And choosing among providers is not a choice between surveillance or no surveillance, but only a choice of which feudal lords get to spy on you.

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Government Surveillance and Control

It can be hard to comprehend the reach of government surveillance. I’ll focus on the US government, not because it’s the worst offender, but because we know something about its activities—mostly thanks to the actions of Edward Snowden.

The US national security surveillance state is robust politically, legally, and technically. The documents from Snowden disclosed at least three different NSA programs to collect Gmail user data. These programs are based on three different technical eavesdropping capabilities. They rely on three different legal authorities. They involve cooperation from three different companies. And this is just Gmail. The same is almost certainly true for all the other major e-mail providers—also cell phone call records, cell phone location data, and Internet chats.

To understand the role of surveillance in US intelligence, you need to understand the history of the NSA’s global eavesdropping mission and the changing nature of espionage. Because of this history, the NSA is the government’s primary eavesdropping organization.

The NSA was formed in 1952 by President Truman, who consolidated the US signals intelligence and codebreaking activities into one organization. It was, and still is, part of the US military, and started out as entirely a foreign intelligence-gathering organization. This mission rose in importance during the Cold War. Back then, a voyeuristic interest in the Soviet Union was the norm, and electronic espionage was a big part of that— becoming more important as everything was computerized and electronic communications became more prevalent. We gathered more and more information as both our capabilities and the amount of communications to be collected increased.

Some of this was useful, though a lot of it was not. Secrets of fact—such as the characteristics of the new Soviet tank—are a lot easier to learn than mysteries of intent— such as what Khrushchev was going to do next. But these were our enemies, and we collected everything we could.

This singular mission should have diminished with the fall of Communism in the late 1980s and early 1990s, as part of the peace dividend. For a while it did, and the NSA’s other mission, to protect communications from the spying of others, grew in importance. The NSA became more focused on defense and more open. But eavesdropping acquired a new, and more intense, life after the terrorist attacks of 9/11. “Never again” was an impossible mandate, of course, but the only way to have any hope of preventing something from happening is to know everything that is happening. That led the NSA to put the entire planet under surveillance.

Traditional espionage pits government against government. We spy on foreign governments and on people who are their agents. But the terrorist enemy is different. It isn’t a bunch of government leaders “over there”; it’s some random terrorist cell whose members could be anywhere. Modern government surveillance monitors everyone, domestic and international alike.

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This isn’t to say that government-on-population surveillance is a new thing. Totalitarian governments have been doing it for decades: in the Soviet Union, East Germany, Argentina, China, Cuba, North Korea, and so on. In the US, the NSA and the FBI spied on all sorts of Americans in the 1960s and 1970s—antiwar activists, civil rights leaders, and members of nonviolent dissident political groups. In the last decade, they’ve focused again on antiwar activists and members of nonviolent dissident political groups, as well as on Muslim Americans. This latest mission rose in importance as the NSA became the agency primarily responsible for tracking al Qaeda overseas.

Alongside this change in target came an evolution in communications technology. Before the Internet, focusing on foreign communications was easy. A Chinese military network only carried Chinese communications. A Russian system was only used for Russian communications. If the NSA tapped an undersea cable between Petropavlovsk and Vladivostok, it didn’t have to worry about accidentally intercepting phone calls between Detroit and Cleveland.

The Internet works differently. Everyone’s communications are mixed up on the same networks. Terrorists use the same e-mail providers as everyone else. The same circuits that carry Russian, Iranian, and Cuban government communications could also carry your Twitter feed. Internet phone calls between New York and Los Angeles might end up on Russian undersea cables. Communications between Rio de Janeiro and Lisbon might be routed through Florida. Google doesn’t store your data at its corporate headquarters in Mountain View; it’s in multiple data centers around the world: in Chile, Finland, Taiwan, the US, and elsewhere. With the development and expansion of global electronic communications networks, it became hard not to collect data on Americans, even if they weren’t the targets.

At the same time, everyone began using the same hardware and software. There used to be Russian electronics, radios, and computers that used Russian technology. No more. We all use Microsoft Windows, Cisco routers, and the same commercial security products. You can buy an iPhone in most countries. This means that the technical capability to, for example, break into Chinese military networks or Venezuelan telephone conversations is generalizable to the rest of the world.

The US has the most extensive surveillance network in the world because it has three advantages. It has a larger intelligence budget than the rest of the world combined. The Internet’s physical wiring causes much of the world’s traffic to cross US borders, even traffic between two other countries. And almost all of the world’s largest and most popular hardware, software, and Internet companies are based in the US and subject to its laws. It’s the hegemon.

The goal of the NSA’s surveillance is neatly captured by quotes from its top-secret presentations: “collect it all,” “know it all,” and “exploit it all.” The agency taps the Internet at the telcos and cable companies, and collects e-mails, text messages, browsing history, buddy lists, address books, location information, and pretty much everything else it can get its hands on. There is no evidence to suggest that the NSA is recording all telephone calls in the US, but we know it is doing so in (at the least) Afghanistan and Bermuda under the SOMALGET program. The agency’s 2013 budget was \$10.8 billion; it directly employs some 33,000 people, and many more as contractors. One of the Snowden documents was the top-secret “Black Budget” for the NSA and other intelligence agencies; the total for 2013 was \$53 billion. Estimates are that the US spends \$72 billion annually on intelligence.

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