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The Incentives Businesses Need to Stop Farming User Data to Third Parties

Third-party tracking has become so prevalent and the surveillance economy so rich, it can be difficult to see the upside of taking a hard stance on data privacy in an increasingly digitized sales environment. Businesses have been proselytized to pursue every last morsel of user data to try to engage customers and drive growth. Better customer data, they’re told, is the competitive advantage that will decide the winners and losers in the market.

Certain businesses go to great lengths to obfuscate what and how much data they are taking from users. So what exactly are they doing? How does third-party tracking really work?

Let’s say a tire company uses third-party software on its homepage to field sales inquiries from prospective clients. That chat software can and does collect little bits of personal information such as browsing history, app usage, and geolocation to form a behavioral profile unique to each user. That information can then be sold to advertisers, who in turn deliver targeted ads. What makes third-party tracking so pernicious is that it occurs without the user’s consent. Since the tire company is partnered with the chat software (likely for free), the prospective customer is left in the dark about how his or her data is being collected and used.

That’s different than a consumer or employee signing up to use a business app or social media platform directly. In that case, users have to sign an agreement–an opaque agreement, to be sure–which typically outlines the company’s privacy stance and what they’ll do with the user’s data. With third-party tracking, no such disclosure takes place.

In December, Zoho along with CRM Essentials published the results of an extensive survey of 1,400 business leaders in various industries throughout North America. The results reveal a disconnect between how vigilant companies believe they are in protecting user privacy and how comfortable they are with third parties tracking their customers. Of respondents, 62 percent said that they do not tell their customers about third-party ad trackers collecting their data; however, 55 percent believe their company has a well defined, documented policy outlining customer data privacy. Not surprisingly, the segment of respondents who cited third-party ad platforms as a primary factor in meeting sales goals and objectives were much more comfortable with how these platforms treated customer data.

Regardless of how they felt about it, 100 percent of survey respondents said their companies allow third-party tracking code on their sites and apps. More than half said they were “comfortable” or “very comfortable” with the way third-parties use customer data. In other words, businesses aren’t telling their customers that they’re being tracked not because they don’t know, but because they don’t feel it’s necessary. Perhaps that comes from the fact that most businesses surveyed depend on third-party data to achieve sales goals.

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So why stop now?GDPR, CCPA, and other mandated data privacy legislation certainly makes stockpiling personal data without consent more difficult, but not so difficult as to stop or even slow it down, yet. What we learned from the privacy study is that business leaders aren’t morally compelled to change their behavior either.

Like most things concerning the business, a change of heart has to start with the numbers. The cost/benefit ratio of surveilling potential customers isn’t nearly as good as these businesses have been led to believe. The value of what is being billed as highly personalized customer data is largely overblown and oversold by companies that traffic in it.

Nearly 30 percent of the business leaders surveyed, for example, said that half of their marketing budget is spent on third-party ad platforms, and nearly 10 percent spent 76 percent of their marketing budget on these platforms. Depending on the size of the organization, that’s a lot of money being paid out for the same customer information being sold to competitors. Businesses should ask themselves whether that money could be better spent in research and development or content marketing, or just general business operations. New hires? New products?

In January 2020, Zoho removed all third-party trackers from all of its properties without any sustained loss of revenue. We wanted to practice what we preach on data privacy, and found that if anything, getting rid of trackers helped increase sales and boosted customer loyalty. Why? It gave customers a clear choice when evaluating us against competitors, and that’s always good for business.

Differentiation is a bottom-line incentive for splitting from predatory third-party advertising platforms. It is better to be a company ahead of privacy regulations and changing attitudes around data privacy than to begrudgingly follow suit after the fact. The window of opportunity is closing for organizations that want to stand on the strength of their data privacy policies. Soon regulators and legislation like GDPR are going to severely restrict the types of data that can be surreptitiously taken from employees and consumers. Companies like Apple, Firefox, even DuckDuckGo have already leveraged their dedication to user privacy as a way to grow and generate new business.

We as individuals or employees or customers are not currently entitled to privacy on the Internet. And that’s a shame. More can be done to restore the public’s faith in the businesses and software that we increasingly rely on and interact with daily. The desire for better privacy policies online is there from citizens. Businesses that understand that desire and can meet customers halfway will be most successful in the coming decades, when the cost of third-party tracking outweighs the benefits in everyone’s mind.

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