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The Hidden Price Of Free Applications Wed 26 May 10

Access to our personal data is the price we pay for ''free'' services on the Internet.

Privacy issues, the Internet and social media in particular have been getting a lot of attention lately. Facebook has become the poster child for privacy concerns about the data we divulge online.

The villain in all of this isn't the technology, since technology isn't inherently good or evil. The issue is how technology is used. That is driven by the business model of the Internet and social media.

Google, Yahoo, Facebook and others of their type provide so-called "free" services. These companies are funded through advertising. Twitter has been the most notable holdout on monetizing its services, but that won't last forever.

The basic business model follows the "golden rule"--not the one your mother taught you, but this one: "He who has the gold makes the rules." In this case, the advertisers have the gold.

The No. 1 factor for success in advertising and marketing is "Know your customer!" The personal data in our social media accounts are a gold mine for advertisers. The people we connect with, the websites we visit, the quizzes and polls we answer--we are giving advertisers a treasure trove of information.

Advertisers want to mine this data to better target ads to us in the never-ending quest to get us to buy more from them. From their standpoint, the more data, the better. Privacy is not their friend.

Thus Facebook and others have a natural incentive to collect as much private data about us as possible to sell to their advertisers. To date the only counterbalancing force to this is the collective hue and cry of the public over what we are giving up.

Our data is the price we pay for these "free" services. Facebook and the other social media sites have to perform a delicate balancing act. They want to extract as much data as possible from us. But they can't go too far or they'll alienate and lose their users--and possibly invite tighter legislative restrictions on how they handle our data.

All of the social media companies talk about "providing options" and ways for you to control their access to your data. They know that most people don't know enough or care enough to adjust their privacy settings as conditions change.

Why should chief information officers care about all of this? The simple reason is it just might be your employees who are giving out your data to social media sites. It probably won't be someone deliberately posting sensitive or confidential data on the Internet. Rather it will be an inadvertent disclosure of data, or maybe the allowing of others to see the data your employees generate--like the websites they visit.

Many CIOs want to block employee access to social media sites, saying they lower employee productivity and pose security threats. Personally I see the productivity question as a supervisory issue and not an IT issue. Employee education may be the best defense in terms of the security concerns. People will find a way to use social media at work, so you might as well get them to do it responsibly.

I previously predicted that social media would eventually shift to a premium service model in which users would pay for the service and, in turn, receive less spam and more privacy. Shifting the revenue stream from the advertisers to the users will have a corresponding shift in how privacy is viewed. Instead of something to be exploited, personal data will be something to be controlled by the user.

This will likely still happen, but upon further reflection I think the corporate world could be the driving force as it slowly sees the benefit of these social media sites for employees and customers. The corporate world is more likely to accept a premium service that has a periodic cost (monthly or annually) than individual users who may not generate enough revenue to make this model work.

Something will have to change before privacy and other concerns such as spam conflict with the desires of the advertisers to the point that people stop using social media. Don't you think so?

This article is also posted on Forbes.com.  Feel free to join in the discussion either on this site or at Forbes.com

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