surveillance capitalism
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The Issue with Surveillance Capitalism

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I was having a conversation with a group of friends the other day, and we were talking about how Google or Facebook or any of these companies that offer completely free to use services make money. Most people seem to believe that these companies sell your data, but in reality, it’s a little more complicated than that. These companies actually function differently from traditional companies that sell consumers things, and it all relies on an entirely different economic system: Surveillance Capitalism. Harvard Business School Professor Shoshana Zuboff coined the term in her book The Age of Surveillance Capitalism. By writing this article, I want to clear up the confusion on how big tech makes its money without charging users for its products, and expose the underlying issues of this lucrative system.

Google and the Behavioral Surplus

To begin this discussion we need to talk about the pioneer of it all: Google. Google started as a project devoted to building the most sophisticated search query and database, one that could store the world’s information. As people began using Google Search, Google realized that the data exhaust, or bits of data about users that were unused at this point, could be used to continuously improve their search function. This is the operation of the behavioral value reinvestment cycle. As users use the search, their behavioral data is extracted as raw material, and then reinvested into improving Search. But as a young Silicon Valley startup, Google needed to make money, and just improving Search wasn’t paying the bills.

The Behavioral Futures Market

Google turned to advertising to solve this issue, but in a way that has never been done in the past. A search that used an advertiser’s keyword would prompt the advertising link at the top of the search, which was different as advertisers could now actually see how well their ads did based on who clicked on the link. Google used its behavioral surplus collected by users to develop an auction system that would decide who to give these ads to in order to maximize revenue. As a Bloomberg journalist explained in 2006, “Google did this by giving its best position to the advertiser who is likely to pay Google the most in total, based on price per click multiplied by Google’s estimate of the likelihood that someone will click on the ad.”

While it seems like an elegant way to make money off their search platform, this change makes the service fundamentally different from before. Now, rather than use behavioral data just to improve the platform for users, this data would now serve the interests of advertisers, with improvements to the platform as a side benefit. Facebook soon developed a similar algorithm to target users with advertisements. Rather than selling data outright to companies, what these companies do is sell a product that allows advertisers to target specific people. 

Conclusion

In my view, the real issue is the extent to which these companies have cornered the market, making their supply chain (the collection of behavioral data) impossible for other companies to utilize. They do this all while using euphemisms to hide these monopolistic and privacy-violating practices. The recent big tech hearings where Congressmen grilled Apple, Amazon, Facebook, and Google are but a start to protecting our data and allowing for more competition in the marketplace. These companies can watch us all they want, but if we are to gain back our privacy, we must be watching back.

About the author

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I write about quantitative and behavioral economics, as well as finance. I am a rising junior at Cal Poly SLO.