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Presented to ATSE Canberra, on 18 July 2018
Roger Clarke **
© Xamax Consultancy Pty Ltd, 2018
Available under an AEShareNet licence or a Creative Commons licence.
This document is at http://www.rogerclarke.com/EC/DSEP.html
The accompanying slide-set is at http://www.rogerclarke.com/EC/DSEP.pdf
Consumers have become dependent on computing services that corporations offer them, seemingly gratis. But second-generation World Wide Web protocols have subverted what was once a user-oriented infrastructure. The Web now enables the monitoring of consumers' identities, behaviour, attitudes and preferences.
Data is acquired from individuals' devices and transactions. Some of this collection is consensual, but most of it is surreptitious. Added to that, a great deal of trafficking occurs within what has become a highly complex industry structure. The data is used to establish and maintain vast numbers of rich digital personae, each of which represents a consumer. This enables ads to be targeted, behaviour influenced, and the maximum feasible revenue extracted by means of micro-pricing.
This new world of mass customisation offers consumers convenience, but in the process strips them naked, manipulates their behaviour, extorts high prices, and enables marketers to discriminate against individuals who they don't want as customers. But the process is conducted in such a manner that few people outside the industry appreciate how it works.
Corporations need to be weaned off their dependence on the digital surveillance economy, and a reasonable balance achieved among stakeholder interests. For that to happen, active intervention by policy-makers is needed.
(2) The term 'surveillance' began in the late 18th century as a visual notion, when Jermey Bentham conceived a 'pan-optic' layout for prisons, as a an alternative to transportation. Orwell's 1984' continued the tradition, although the city council staff in Barcelona don't seem to have read that particular book.
(3) By the 1980s, however, it was recognised that far more efficient surveillance of individuals, and of populations, could be conducted through observation of their data rather than of their bodies and activities (Clarke 1988). The notions of 'surveillance society' and 'the surveillance state' soon followed.
(4) It took until about 2005-10, however, to establish the technological infrastructure necessary to support 'the surveillance economy'. The change has since been rapid. Consumer marketing corporations have now largely abandoned the expensive approach of dealing with customers. They now structure their business models around data about their customers, consolidated into a 'digital persona'.
(5) Exemplars of how to succeed in the Digital Surveillance Economy are provided by familiar corporate brandnames. Each of these corporations has leveraged off its very large marketshare in particular arenas, and achieved extraordinary revenue per 'customer' and per employee, and extraordinary share-prices and market capitalisation.
(6) Instruction on how to go about building a successful business is provided by a Harvard Business School textbook. It expressly proposes that consumers be "bribed" and "induced". In many contexts, such activities are of course illegal; but apparently not in the context of consumer marketing. Shortly after the book was published, the second-named author, Hal Varian, was hired from his Professorship at Berkeley to become Chief Economist at Google; and he's still there.
(7) The Digital Surveillance Economy involves a number of mutually dependent activities, which can be roughly divided into expropriating personal data, consolidating it and munging it into useful forms, and then exploiting it. A simplified model of the sector involves a dozen activities. In order to get to grips with how it works, what its impacts are, and what can be done about it, it's necessary to delve into a little detail about these activities.
(8) Some of the data gathering that takes place is directly from the consumer, the consumer is aware that it's happening, and the gathering of the data - and even some of the uses to which it's later put - may be more or less consensual.
(9) A great deal of the data gathering, however, is surreptitious. Some is a byproduct of the technical processes necessary to deliver network-based services. Some can be seen as contrived extensions to those processes. And some are at least skulduggerous, and even quite simply criminal in nature.
(10) The extent of surreptitious, largely non-consensual data collection is attested to by in excess of 200 companies that perform 'consumer tracking', and whose operations are largely unknown to the consumers whose data they pilfer and whose behaviour they seek to understand.
(11) Some of the data gathering breaches reasonable behaviour in a further way. Corporations make arrangements among themselves that enable data to be acquired not only by companies that the consumer is actually in contact with, but also by other companies as well. One way this is done is to force people to login on a site, and then make it difficult for people to logout, such that tracking remains on even after the consumer thinks that they've left the site.
(12) So the digital surveillance is complex and big. And a great deal of the activity is covert, And any consent that's involved is basically a pretence rather than real. So it's no surprise to find that few consumers understand what's going on. Here's a headline in the Australian media from 2 days ago. That's based on research by a human rights association.
(13) And what do people think of all this cheating? Here's an announcement 12 days ago by an Australian commercial pollster. And he's announced that people say they don't like it one little bit.
(14) People say that they're really upset about the purloining of particular kinds of data, such as photos of their children, their device-IDs and the content of their messages. But they don't actually do much about it.
(15) There are multiple other channels through which corporations acquire data about consumers. Most people now make much less use of anonymous experience-gathering channels such as the literally printed word, book-shops, libraries, cash-based theatres, lecture-halls and 'speaker's corner'. The experiences that they accumulate are instead subject to electronic surveillance.
(16) Added to that, data arising in many contexts is treated as though it were 'in the public domain', which corporations treat as meaning 'fair game' for any use they want to put it to.
(17) The data that each corporation acquires has value in exchange. So it's widely trafficked, variously for cash and by barter. After decades of such activities by what were once called 'direct mail' and then 'direct marketing' companies, consumers seem to have become inured to these abuses. There are occasional break-outs, such as when charities are caught out behaving just as badly as any other marketer.
(18) In case enough evidence of underhand data trafficking wasn't already available, The Wall St Journal revealed 14 days ago that Google has been cheating and lying about yet another aspect of its operations. Public warnings were issued when Gmail was launched in 2004, but many millions of people have suckered for the pitch.
(19) Of course, vast legacy databases exist, are computerised, and are available for abuse in similar ways to the new network-based sources.
(20) Data from any and all of these sources is consolidated, and associated with one or more identifiers. Of the various terms used to describe the resulting melange, 'digital persona' is the most useful (Clarke 1994, 2014a). A digital persona may or may not use what people think of as conventional identifiers (such as name, address and date of birth). What matters to the marketer is that there's something in the data that enables it to be associated with particular eyeballs peering at a screen somewhere.
(21) The sophistication of the digital surveillance economy is attested to by a complex industry structure, and many hundreds of profitable corporations with vast data-holdings, above and beyond the vertically-integrated 'FANGS' noted earlier as exemplars of the postmodern business model.
(22) If people say that they don't like corporations doing these things, shouldn't such behaviour be illegal? A variety of laws might be used against these corporations and activities, including by a variety of oversight agencies. But no, they haven't had much impact at all. These hundreds of companies are carrying on regardless.
(23) That's addressed the first part of the supply chain, in the left-hand half of the diagram. So what do they do with all this data??
(24) The data is analysed, in a range of ways, for a range of purposes. One widely-used approach is to categorise each digital persona, by comparing it with one or more abstract profiles.
(25) Some analyses are concerned with populations and sub-populations; and others with individuals. Marketing corporations invest a great deal in understanding the kinds of people that they can make a lot of money out, but also the kinds that they would prefer to avoid. (Olden-day examples include 'tyre-kickers', the insufficiently well-off, and the over-demanding).
(26) Things go wrong, of course. The quality of the decision made depends on the quality of the data, and the quality of the process applied to the data, but also to the extent to which the digital persona accurately models the person about whom decisions are being made. How can problems get fixed? There's an array of seemingly relevant complaints channels. But not a single one of them is at all effective.
(27) The category of decision-making most central to the digital surveillance economy is the selection or customisation of advertisements to stimulate the individual consumer to part with money. The claim is that ad targeting done this way is very, very good. And a very large and very profitable industry runs on the basis of that claim.
(28) Are there effective consumer protections in this area? No, not at all.
(29) The end-result of effective ad targeting, particularly when it's done over time, and consistently, rather than as a once-off activity, is substantial influence over the behaviour of the consumer.
(30) The final element of the postmodern business model is the way in which prices are set. Gone is the one-price-for-all offer. No longer is the marketer forced to broadcast a price, and hence to gauge what the market as a whole will bear, and set the price in a way intended to maximise overall revenue. In the world, that decision can be made about each individual consumer. Some (generally, the least desirable) consumers may pay less. Most will pay more, and many will pay a lot more, because their buttons have been pushed, in the right way, at the right time, and they've been conditioned to perceive it to be the right product.
(31) There's an expectation that abuses of market power will be subject to controls. But it's exremely difficult to find any basis in law for combatting the micro-pricing process. The current variant of consumer protection law is approaching a decade old, the only provisions that could arguably be relevant appear to not address these issues, and they're in any case almost entirely untested in the courts.
(32) Inherent in this discussion have been substantial impacts of the digital surveillance economy on individuals.
(33) And there are also major implications at the levels of society and political economy.
(34) And of course the application of the same digital personae to political rather than economic behaviour has been in the news lately. This very morning, Trump has apologised to the American people for appearing to trust Putin more than his own security services. Impacts on the polity isn't the main focus of what's been addressed here; but some would argue that this is an even greater threat to 'the world as we've known it' than the damage being done to consumers.
(35) By the way, there was an update a week ago on Facebook's breach in the Cambridge Analytica matter. The UK Information Commissioner is doing everything she can; but it won't make a scrap of difference to Facebook.
(36) There are of course some natural forces that may result in the present massive over-balance in favour of marketing companies adjusting back a little in the consumer's behaviour.
(37) And there are various kinds of things that can be done if any parliament gets out of the 'bull-ring' and 'politics as sport' mentality for a while, and actually seeks to pass laws that balance competing interests.
(38) So several possible scenarios can be described, which have potentially quite varied outcomes. Right now, however, there's almost no sign of the first four, and the fifth is the default that we see around us.
Clarke R. (1988) 'Information Technology and Dataveillance' Commun. ACM 31,5 (May 1988) 498-512, PrePrint at http://www.rogerclarke.com/DV/CACM88.html
Clarke R. (1994) 'The Digital Persona and its Application to Data Surveillance' The Information Society 10,2 (June 1994) 77-92, PrePrint at http://www.rogerclarke.com/DV/DigPersona.html
Clarke R. (2014a) 'Promise Unfulfilled: The Digital Persona Concept, Two Decades Later' Information Technology & People 27, 2 (Jun 2014) 182 - 207, PrePrint at http://www.rogerclarke.com/ID/DP12.html
Clarke R. (2014b) 'The Regulation of Civilian Drones' Impacts on Public Safety' Computer Law & Security Review 30, 3 (June 2014) 263-285, PrePrint at http://rogerclarke.com/SOS/Drones-PS.html
Clarke R. (2018) 'Risks Inherent in the Digital Surveillance Economy: A Research Agenda' Forthcoming, Journal of Information Technology, PrePrint at http://rogerclarke.com/EC/DSE.html
Roger Clarke is Principal of Xamax Consultancy Pty Ltd, Canberra. He is also a Visiting Professor in Cyberspace Law & Policy at the University of N.S.W., and a Visiting Professor in the Research School of Computer Science at the Australian National University. He has served for many years on the Board of the Australian Privacy Foundation, and as Company Secretary of the Internet Society of Australia.
The content and infrastructure for these community service pages are provided by Roger Clarke through his consultancy company, Xamax.
From the site's beginnings in August 1994 until February 2009, the infrastructure was provided by the Australian National University. During that time, the site accumulated close to 30 million hits. It passed 60 million in early 2019.
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This document is at www.rogerclarke.com/EC/DSEP.html