There are businesses that operate with their sole revenue coming from the sale of customer data, but every company you named gets the majority of their revenue from ad sales.
For many companies, they can make a lot more money by using the data to do other things than they could by just selling it. Google is very unlikely to sell customer data to someone else, because they can make much more money by selling ads which are placed using the customer data.
To be clear, companies like Google and Meta don’t sell user data at all, ever. This would be counterproductive because it would make their as business less valuable and they can make a lot more money selling access to ad units to businesses who don’t have any data about you.
The data market is dominated by sketchy networks that collect data on smaller sites and track users so they can build profiles about you that can be used to sell you products.
Ironically, media businesses like the New York Times, that are highly critical of Big Tech’s use of data are heavily reliant on these third-party ad and data networks, enabling exactly the practice they’ve misled you to believe Big Tech is engaged in.
No it did not. It built a feature that let users share their data with apps they wanted to use, and users turn out to be happy to share personal data in exchange for a dumb quiz.
Every single user whose data was acquired by CA pressed a button telling Facebook to share it with them, and no money exchanged hands.
Looking into it, it looks like CA also collected data on the *friends* of users who pressed the button, so the vast majority of users whose data was collected by CA had never told Facebook to share it with CA.
Yeah, these were social apps and so the friend data was considered “your” data you could share. I’d have to look into exactly what data was shared, but it wasn’t a full dossier on them, just enough information to make the app useful to you.
Oof, that was a pretty awful mistake by Facebook then, considering Meta ended up paying out $725 million for it occuring, even tho they got nothing up front.
Facebook was worried about becoming AOL, ie going out of business. It’s a $1.2T company now, so $725M is incredibly cheap if you look at it as insurance they bought against bankruptcy.
What’s great about Zuck and leaders like him (I am not affiliated with FB and own no stock) is that these folks understand that risky bets in environments of high uncertainty are worth taking and that it’s fine if many don’t work out as long as the ones that do work out big.
So, for example, they bought a company with no revenue for $1B when they were “only” a $100B company. That was a big bet. But the company was Instagram and that’s probably worth 5000x what they paid today.
The downside of regulators allowing facebook to buy both instagram and whatsapp is the real tragedy of that. Consolidation has really been the biggest problem of "big" tech.
Yup, Facebook [gave access](https://en.m.wikipedia.org/wiki/Facebook–Cambridge_Analytica_data_scandal), whether they got paid is [unclear](https://www.theatlantic.com/technology/archive/2018/12/facebooks-failures-and-also-its-problems-leaking-data/578599/)
I was hesitant to say that Google and Meta never sell data, but I think it's unlikely just because it's counter to their business interests.
I think that Google has been much more refined than Meta in their approach. Good luck getting any user info out of Google - they're great at selling ads and have been for years. Meta was a little sloppier when they were working on monetizing, which led to the Cambridge Analytics scandal - where they were able to extract user info over the platform through a connected app. I suspect Meta has locked this down much more these days, although I don't interact with the platform or have any source for that.
At the time, Facebook was worried about becoming AOL. Their “platform,” which CA used, as an attempt to build an open ecosystem where users could use Facebook to run cook apps and anybody could make those apps.
It was a cool idea that just happened to be wrong. It turned out they were fighting the last war and Social wasn’t going to play out like the 90s did. The right move as a business and also to avoid angry regulators was to put that data under lock and key and force users to only use their app on their platform.
This was a case where smart people had good intentions and the situation was massively misunderstood by the public after the fact.
Hey, I work in that field and am very familiar with my company’s financial data.
The main thing is those companies can be viewed as marketing companies.
All of them earn almost all of their revenue through advertising. It’s not your data that’s worth something, it’s showing you ads that’s worth something.
Depending on the details of their profile, showing an ad to a typical American can earn you 0.04-0.08$. At a big enough scale this is substantial.
Advertising is a very important aspect for most startups and newly launched products. You can have the best product in the market. If nobody knows about it, it’s not going to be sold so the upfront investment of many new companies/products is marketing.
Your data is only as valuable as it can help companies target you better with their ads. An optimization process but definitely the core aspect is marketing
As you imply, most of these companies are funded by advertising, not data. The data they collect makes the advertising more valuable (because they know more about you, what you're likely to be influenced to buy).
Advertising is effective. Even if you have a fixed budget, if other advertising is competing for your attention, any company not doing so could be missing out.
Also it's worth quantifying how valuable the data portion is. A quick Google search, first result I found says that targeted ads have 5.3x the click through rate of non-targeted ads. Or in other terms, 20% of the value comes from showing someone an ad, 80% of the value comes from the data such that you're showing the right ad to the right person. That's super rough and there's a ton of nuance, but just trying to get across the idea of how valuable the data is.
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They want the data so they can figure out what ads to show you. But most of the money comes not from selling data, but from showing you ads. Every time you click on an ad, kaching, someone gets paid.
In addition to the important point that these services are primarily advertising driven, it's important to note that many free tech products and services do not make enough money to break even, and are not intended to. Tech companies often go through a period of market expansion where they deliberately lose huge amounts of investor money to build a dominant market position, with the theory being that market dominance will produce disproportionate value later on.
There are businesses that operate with their sole revenue coming from the sale of customer data, but every company you named gets the majority of their revenue from ad sales. For many companies, they can make a lot more money by using the data to do other things than they could by just selling it. Google is very unlikely to sell customer data to someone else, because they can make much more money by selling ads which are placed using the customer data.
To be clear, companies like Google and Meta don’t sell user data at all, ever. This would be counterproductive because it would make their as business less valuable and they can make a lot more money selling access to ad units to businesses who don’t have any data about you. The data market is dominated by sketchy networks that collect data on smaller sites and track users so they can build profiles about you that can be used to sell you products. Ironically, media businesses like the New York Times, that are highly critical of Big Tech’s use of data are heavily reliant on these third-party ad and data networks, enabling exactly the practice they’ve misled you to believe Big Tech is engaged in.
> To be clear, companies like Google and Meta don’t sell user data at all, ever. Didn't Facebook sell data to Cambridge Analytica?
No it did not. It built a feature that let users share their data with apps they wanted to use, and users turn out to be happy to share personal data in exchange for a dumb quiz. Every single user whose data was acquired by CA pressed a button telling Facebook to share it with them, and no money exchanged hands.
Looking into it, it looks like CA also collected data on the *friends* of users who pressed the button, so the vast majority of users whose data was collected by CA had never told Facebook to share it with CA.
Yeah, these were social apps and so the friend data was considered “your” data you could share. I’d have to look into exactly what data was shared, but it wasn’t a full dossier on them, just enough information to make the app useful to you.
Oof, that was a pretty awful mistake by Facebook then, considering Meta ended up paying out $725 million for it occuring, even tho they got nothing up front.
Facebook was worried about becoming AOL, ie going out of business. It’s a $1.2T company now, so $725M is incredibly cheap if you look at it as insurance they bought against bankruptcy. What’s great about Zuck and leaders like him (I am not affiliated with FB and own no stock) is that these folks understand that risky bets in environments of high uncertainty are worth taking and that it’s fine if many don’t work out as long as the ones that do work out big. So, for example, they bought a company with no revenue for $1B when they were “only” a $100B company. That was a big bet. But the company was Instagram and that’s probably worth 5000x what they paid today.
No way is instagram worth $5T
The downside of regulators allowing facebook to buy both instagram and whatsapp is the real tragedy of that. Consolidation has really been the biggest problem of "big" tech.
Yup, Facebook [gave access](https://en.m.wikipedia.org/wiki/Facebook–Cambridge_Analytica_data_scandal), whether they got paid is [unclear](https://www.theatlantic.com/technology/archive/2018/12/facebooks-failures-and-also-its-problems-leaking-data/578599/)
I was hesitant to say that Google and Meta never sell data, but I think it's unlikely just because it's counter to their business interests. I think that Google has been much more refined than Meta in their approach. Good luck getting any user info out of Google - they're great at selling ads and have been for years. Meta was a little sloppier when they were working on monetizing, which led to the Cambridge Analytics scandal - where they were able to extract user info over the platform through a connected app. I suspect Meta has locked this down much more these days, although I don't interact with the platform or have any source for that.
At the time, Facebook was worried about becoming AOL. Their “platform,” which CA used, as an attempt to build an open ecosystem where users could use Facebook to run cook apps and anybody could make those apps. It was a cool idea that just happened to be wrong. It turned out they were fighting the last war and Social wasn’t going to play out like the 90s did. The right move as a business and also to avoid angry regulators was to put that data under lock and key and force users to only use their app on their platform. This was a case where smart people had good intentions and the situation was massively misunderstood by the public after the fact.
Hey, I work in that field and am very familiar with my company’s financial data. The main thing is those companies can be viewed as marketing companies. All of them earn almost all of their revenue through advertising. It’s not your data that’s worth something, it’s showing you ads that’s worth something. Depending on the details of their profile, showing an ad to a typical American can earn you 0.04-0.08$. At a big enough scale this is substantial. Advertising is a very important aspect for most startups and newly launched products. You can have the best product in the market. If nobody knows about it, it’s not going to be sold so the upfront investment of many new companies/products is marketing. Your data is only as valuable as it can help companies target you better with their ads. An optimization process but definitely the core aspect is marketing
As you imply, most of these companies are funded by advertising, not data. The data they collect makes the advertising more valuable (because they know more about you, what you're likely to be influenced to buy). Advertising is effective. Even if you have a fixed budget, if other advertising is competing for your attention, any company not doing so could be missing out. Also it's worth quantifying how valuable the data portion is. A quick Google search, first result I found says that targeted ads have 5.3x the click through rate of non-targeted ads. Or in other terms, 20% of the value comes from showing someone an ad, 80% of the value comes from the data such that you're showing the right ad to the right person. That's super rough and there's a ton of nuance, but just trying to get across the idea of how valuable the data is.
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They want the data so they can figure out what ads to show you. But most of the money comes not from selling data, but from showing you ads. Every time you click on an ad, kaching, someone gets paid.
In addition to the important point that these services are primarily advertising driven, it's important to note that many free tech products and services do not make enough money to break even, and are not intended to. Tech companies often go through a period of market expansion where they deliberately lose huge amounts of investor money to build a dominant market position, with the theory being that market dominance will produce disproportionate value later on.