Research: A market where consumers can pay for privacy is emerging

This post was written by Ajit Ghuman, the author of Price To Scale.

Location tracking, e-commerce history, online buying behavior, and biometric information — there has been a slow but consistent erosion of consumer privacy.

Consumers used to be very comfortable sharing personal data with brands in order to see more personalized content, but that is no longer the case. In fact, they increasingly see privacy as a premium product feature.

Some companies are responding to this shift in privacy expectations, and Apple has already begun to corner this new market. Apple’s new transparency features will allow consumers to choose how their data is managed and handled. This puts them at loggerheads with Facebook, whose $40 billion digital advertising business will be in its direct line of fire.

But just how much are consumers willing to pay?

A hidden market for privacy

Product marketing expert Ajit Ghuman recently conducted a research study directly measuring the price consumers place on privacy. The resulting Emerging Market For Privacy report, conducted with Conjoint Analysis (CA), analyzed social media subscriptions and smartphone usage. The variables under consideration were a combination of privacy- and price-based attributes.

The findings were very telling.

There is a $14-$18 Billion Market for a fully secure social media network

Ghuman found that 42% of US consumers are willing to pay $12 per month for complete privacy on a social media network, and as much as 50% of US consumers are willing to pay $8 per month for a fully private social media network. People are showing a strong willingness to secure their information even if it means they need to shell out a fixed amount month-on-month.

A hidden market segment emerges based on shopping habits

Active online shoppers are defined as those who are ‘Very Likely’ to make a purchase online in the next 12 months. Their willingness to pay for a social media subscription is a low $4 a month. With their regular and repeated online spending habits, privacy doesn’t feature too high on their list of concerns. Others — those who are not very likely to make an online purchase, show a greater degree of concern, and are willing to part with $10 per month — if full privacy can be delivered for a social media subscription. It’s interesting these two segments form roughly half of the consumers surveyed, indicating a significant opportunity to build privacy-first products for consumers who aren’t regular shoppers.

Working age adults will pay the most for privacy

Young Americans below 25 years of age are less willing to pay for privacy. But that changes above the age of 25 with 25-34 year olds willing to pay the most on average for privacy, with the willingness to spend decaying at older ages. This potentially indicates a need to protect personal income and wealth from the risk of loss of personal data.

Men want secure social media. Women want secure smartphones

In a surprising finding, it appears that women value smartphone privacy more than they value privacy on Social Media platforms. Men on the other hand, showed a greater willingness to pay for privacy in social media subscriptions than for smartphone data privacy.

Android buyers will pay more for privacy than iPhone users

Consumers who are very likely to purchase an Android phone are willing to pay $3 more for a social media product and $10 for the smartphone purchase than consumers who are likely to purchase an iPhone. This result is not very surprising given a generally weaker perception of privacy in the Android ecosystem.

There is compelling new evidence that there is a new market for privacy. In the face-off between Apple and Facebook, it is clear that it is consumers preferences and their willingness to pay driving the difference in strategies. But Apple vs Facebook is just the beginning. There will yet be new companies that will take birth to address the needs of these new privacy-first consumers.

Ajit Ghuman is the author of Price To Scale and is a SaaS Product Marketing veteran who has helped firms such as Narvar, Medallia, Helpshift, and Feedzai differentiate their products, grow revenue and win. He likes to write all things Product Marketing, and is featured in Sharebird.com‘s list of Top 50 Product Marketing Mentors for 2021. Ajit has a Masters in Management Science from Stanford University and a Bachelors in Electronics and Communication Engineering from Delhi University.