Big Tech’s Free Online Services Aren’t Costing Consumers Their Privacy, New ITIF Report Concludes

WASHINGTON—In an effort to justify aggressive antitrust enforcement against “big tech” platforms, critics have advanced a novel theory of harm, arguing that consumers effectively overpay for free online services by giving up too much data at the expense of their personal privacy. Yet there is no evidence breaking up big online platforms would improve digital privacy, according to a new report from the Information Technology and Innovation Foundation (ITIF), the leading think tank for science and technology policy. To the contrary, ITIF concludes there is strong evidence breaking up these services or curbing data collection would harm consumers and workers.

“First of all: No, Internet users are not ‘paying’ for free online services with their data. It’s a fundamentally flawed analogy,” said ITIF research assistant Hadi Houalla, who authored the report. “When you share data, you experience no loss. You still have your data and can share it again, unlike when you pay for something with money. And more to the point: Targeted ads based on user data don’t harm consumers. The targeted advertising model enables companies to provide highly valuable services to consumers for free, it supports a thriving R&D ecosystem, and it creates a high-value-added tech sector that benefits American workers.”

ITIF’s report highlights that data tracking is not a new phenomenon: credit card issuers itemize consumers’ purchases; telecom companies know what numbers their users call; and loyalty card issuers track purchases of their customers. No one doubts those organizations own that data. Despite the distrust, data tracking makes advertising more efficient for both advertisers and consumers, because targeting reduces irrelevant advertising, helps customers discover new and useful products, makes online search and shopping faster and easier, and boosts revenues, including for small, ad-supported apps.

The report concludes banning targeted advertising would force companies to monetize their services with subscription fees. It would also lower ad effectiveness at a cost of $33 billion a year to the U.S. economy.

The antitrust reform movement argues that aggressive antitrust legislation and enforcement are justified to make big technology companies compete on privacy. But ITIF’s report notes that platforms that distinguish themselves with robust privacy protections are widely available, such as DuckDuckGo, yet few consumers opt for them. DuckDuckGo’s market share is less than 0.8 percent, compared to Google’s over 85 percent market share.

Moreover, aggressive antitrust action that results in undermining ad-supported online services would harm consumers—especially low-income consumers who cannot afford monthly fees for services that are now free.

“Policymakers should not treat data as if it is a limited resource that must be rationed,” said Houalla. “Instead of portraying free online services as villains, Congress should pass a national data privacy law that balances consumer concerns and firms’ ability to operate.”

Read the report.