The Big Question: How Do They Make Money?
If a service is free, chances are you’re the one being sold
“But how do they make money?”
It’s the first question I ask someone whenever they excitedly tell me about a new app or service that they are using (I’m a real hit at parties).
“What do you mean, its free, what does it matter how they make money?” Is usually the reply I get.
Often the answer is ads, usually shown annoying at the top or bottom of the app screen. Or perhaps one of those ultra-annoying full screen ads that appear after failing to complete a level or dying in a game (truly a great incentive to get better). If an app isn’t ad-supported, it will just cost a few dollars upfront (which I will always option for if given the chance). Both options for the app or service to make money is straight-forward and standard practice, however a new way to make money has been rising lately: your data.
Okay, truth be told this isn’t a new way. Websites such as Facebook and YouTube have been double-dipping for years: showing you ads and selling your data to companies, but more and more smartphone apps are starting to switch to data mining as their main form of revenue. People see ads going away and are happy, and I am too, but the problem is that developers often aren’t being upfront with you that they’ve switched from selling ads, to selling your info. They bury these facts in their terms of service that most people quickly click through (don’t feel bad, I do it too). Even people that attempt to read those terms give up quickly once they see that it’s pages and pages full of legalese and terms that they don’t understand. These facts, these deals they make with third party companies to harvest and sell your data to are things you NEED to know about. Stuff like: what data are you harvesting, and who is this data being shared with?
We’ve explored in other articles how companies don’t necessarily have our best interests in mind when it comes to our data. Maybe they are just collecting your data to better show you ads on other services and in websites — which is pretty tame, and perhaps you expect stuff like this. But other times, this data is being used for other purposes, that can actually cost you money. Recently there was an exposé on a popular free kid-tracking app called Life360. On the surface, if you’re okay with tracking your kids, it seems like it’s a good safety-related service. It even goes beyond tracking, and can tell you how fast the car they are in is going, if they got in a crash, or even what the battery level of their device is. All on the surface, great features. But the app is free without ads, so chances are your data is the cost of the service. The reporter who issued the report noted that one of the third parties Life360 sells their data to is a smaller company owned by the insurance provider Allstate. Real-time and history based driving data is a goldmine to an auto insurance company that can in turn use that data to charge you higher rates. I know several parents who use this app and none of them had any idea that Allstate was getting their driving information and were a bit disgusted by it. None of them have stopped using the app though, and that’s fine. If the service that is being provided to you is worth the cost to you, I have no issue with that. The problem is that companies are going out of their way to obscure how they are making money, and what they are doing with your data.
Next time you decide to start using a new app or service, simply ask yourself the question: how do they make money? Same as any physical retail purchase: ask yourself if the price is worth the product.
Stay safe out there.
