On privacy and the online market economy

You either die a hero, or you live long enough to see yourself become the villain. — Harvey Dent

Something similar is happening with Whatsapp today. Its detractors are pointing fingers at Whatsapp for compromising user privacy, knowing full well that the concept of privacy in today’s world is a misnomer. The same people who click on ‘I accept’ without reading a single line of every app license that they use are worried about their privacy. Let me give a context to how this strange world of online commerce became the market economy that today runs the world.

The cornerstone of a market economy is the principle of demand and supply. Traditionally a producer would present her product to a consumer, who would evaluate it and then possibly buy it. This gives the seller some capital with which she can then improve the product and sell it to even more consumers. Meanwhile she would also generate revenue and employ people thus pumping back the capital into the market, raising the per-capita income and enabling even more producers to start production.

This virtuous cycle incentivises improving the quality of a product to serve the consumer’s needs. The traditional interface between the consumer and the producer was of a storefront where they could evaluate the product, which gave the producer the opportunity to ‘market’ her product.

But a physical storefront is not a scalable solution. Thus in the early twentieth century, the concept of a franchise was formulated. With television and radio media at the disposal of the producers, the producer could replicate the success of a store into a franchisee chain. McDonalds is perhaps the most famous of these brands. Wherever you go in the world, a McDonalds standardises the consumer experience in a way that makes it one of the most valuable brands in the world.

With the birth of the internet, there came another dimension into the media of marketing. Imagining the internet as a market economy comes with its own set of challenges. Unlike before, the consumer sits millions of miles from the producer accessing the ‘product’ from her palm. Also, the concept of product changed drastically. Hitherto unknown concepts could now be created as products and needed to be marketed to a stranger sitting somewhere in the world. The internet was now the online avatar of the storefront but without the access the producer previously had to the consumer.

In order to overcome this dead air space (aka the internet) between the consumer and the seller, further incentivization was needed to nudge the consumer to buy on the internet. The internet was the new medium with the promise of great but delayed returns. It would forever solve the problem of scale which the brick and mortar businesses could never dream to achieve. Thus ‘freemium’ models were undertaken with zeal to build the brand online. Some people even made their product totally free, realizing the opportunity of harvesting the behaviour patterns of the consumer — giving them unprecedented insights into the consumer psyche. Thus were born the advertisement networks which were solely built as the new marketing and sales teams of these online businesses.

We must realize that running an online product is expensive. The costs of servers, developers and marketing of a product can become overwhelming quickly. In such a scenario any kind of value that the product creates then becomes a candidate for monetisation. Whatsapp is a great product, it has the heartbeat of a billion installs, and has seen tremendous growth in recent times. When the consumer chooses a free product like Whatsapp or Gmail, she should realize the value that Whatsapp is trying to create. By becoming a part of the Whatsapp network, the consumer is now a potential and valid data point in whatever business Whatsapp decide to invest their insights into. If Facebook want to use Whatsapp chats with business accounts to build their online marketplace they would be within their boundaries to do so. When you call a customer care helpline, why don’t you hang up when you are informed that ‘this call may be recorded for internal quality purposes’? What Whatsapp is now doing is nothing but business as usual. Whenever you use an Android phone with a free OS, or use a free Google product, or call using Jio, remember that the cost is accumulating, and someday you will be paying for it, or are already paying for it without realizing the currency. The currency is you.