We’re all used to the tech business model that provides zero-dollar access to services in exchange for our data.
From the streaming music catalog of Spotify to the myriad services offered by Google, it’s an arrangement that seemingly benefits everyone: We get “free” stuff, while tech companies get access to a rich stream of information about their users that’s way more valuable to them than a one-off purchase fee.
This business model has become standard in the software world of ones and zeroes, but it hasn’t caught on in other walks of life. Just imagine the owner of a restaurant when you fail to present a credit card at the end of the meal, and instead offer to pay by listing facts about your eating habits. Would a car manufacturer be sufficiently interested in info to knock, say, 50 percent off the price of a new BMW should you promise to let them know where you drive it? Both of these examples seem fatuous at first glance. But why?
A list of the world’s most valuable companies is dominated by tech giants, many of whom have proven that their habit of giving away access to services makes sense — and indeed, cents. It’s not limited to software, either. The price of smart speakers like the Amazon Echo and Google Home are bizarrely low, which is an odd strategy when Apple has shown what kinds of margins can be carved out on “must have” tech.
However, owners of the Echo reportedly spend around 10 percent more on Amazon after they buy the smart speaker than they did previously. The same is no doubt true for other “loss leaders” that give away underpriced hardware, knowing that it will give the companies something far more useful on the backend.
In a new book, a technologist for the Ford Motor Company argues that we may be entering a new era in the motor industry: one where the data that can be gathered from sensor-packed cars could offset the need to actually charge customers for new vehicles. A zero dollar car? According to John Ellis, it’s the direction things need to head.
“The model I present in the book works as follows,” Ellis, author of The Zero Dollar Car, told Digital Trends. “The original equipment manufacturer — Ford, for purposes of discussion — sells the vehicle data to a broker or to end companies. That is the monetization opportunity that everyone in the automotive industry keeps talking about. Based on what they are able to sell, they in turn use some of those funds to reduce the price of the vehicle. The more data they can sell, the more opportunity they get to reduce the price of the vehicle.”
A new source of revenue
According to Ellis, under this model car manufacturers could actually stand to make more money than they do charging a single purchase fee of, for instance, $40k. But who cares about your data? That changes by industry, but it’s likely to be the same mix of private and government groups that care about what you do online.
On top of that $3,000, a car company could sell suspension-monitoring system data to the government organizations that maintain highways, or sell voice data from microphones in your car to Google to help train voice recognition systems or target you with better ads.
While Ellis is predominantly focused on cars due to his job with Ford, the same model could be used for other things. 2017 marked the first year in which smart, internet-connected devices outnumbered the world’s human population. We have smart fridges, smart clothes, smart thermostats, smart watches, smart vacuums and heck, even smart toilets. The data that these gather from users is immensely valuable to companies. In a crowded marketplace, being able to offer an item for zero dollars would also immediately result in a massive boom in that product’s popularity.
“Now, I don’t necessarily believe you will [ever get an entire] home for zero dollars,” Ellis continued. “But a home where the mortgage payment is slightly less than it would normally be because of your selling data is definitely something we can envision.”
A thorny ethical dilemma
In some ways, this is a thought experiment. A bit like the Saw movies, where people are asked how much they would do to stay alive, the question here is how much data would you be willing to share to get things for less or even zero money?
We might be comfortable with sharing health data with our insurance company if we got a top-of-the-line “free” fitness tracker, or lower premiums. We might also be happy if we received money off our food bills if our smart toilet can monitor our excrement. We may be less happy if what we say in the comfort of our subsidized home is used to sell us ads.
“Consumers must realize that what they are considering free is in fact not free but rather zero dollars,” Ellis said. “Any of the mobile ecosystems that offer ‘free’ products are in fact offering zero dollar products. Free means nothing is exchanged in return. But all of these so-called ‘free’ products receive your data. And that data exchange is then a transfer of goods from each party. Second, the issue of ownership needs to be properly sorted out. If you purchase a product, what exactly are your rights versus the rights of others? This is not a philosophical question as it is at the heart of the zero-dollar economy.”
Ultimately, there are a whole lot of complexities to this. Would people with poor credit or low income levels feel obliged to surrender their privacy in a way that wealthier folks wouldn’t? Would it be possible to change your mind at 45 after selling a lifetime of your data to buy your first car at 18? Would data need to be anonymized in the same way if you were being paid a premium to access it?
It would certainly present a fascinating development that could help people in an age of increased automation of jobs and stagnating wages, though. How much data would you give up for a zero dollar lifestyle?
“Whenever I ask people that question, the answer hinges on how close the price gets to zero dollars,” Ellis said. “The closer you get to zero, the more willing customers are to say ‘yes’ to selling their privacy.”
Would you be among them?