How to Outwit — and Benefit From — the Surveillance State
Data Analytics

How to Outwit — and Benefit From — the Surveillance State

Using a leaked database and cell tower pings, reporters at The New York Times were able to track a Secret Service agent attached to President Trump’s security detail.

Politicians and privacy activists are outraged. But investors should see smartphones and the applications that track our every move as an opportunity.

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It’s all part of what some derisively call “surveillance capitalism.”

Here’s how you can use it to spot some covert profit opportunities …

Smartphone applications like Google Maps are shockingly good. With location sharing enabled, everyone on the planet is just a few swipes away from never getting lost again and can unabashedly explore the world.

  • If you’re planning a trip to Paris and want to live like the locals, Maps will help you select a place to eat and sleep based on your budget. Arranging rides or making sense of public transit to the Louvre or the Eiffel Tower is just a few taps away.

But there is a cost …

Location sharing means constantly checking in with Google servers. Not only does the search know how to get you where you want to go, it knows where you are, too.

It uses sensors on your smartphone, a deluge of application programming interfaces, and its algorithms to make everything seamless.

It also uses that data to serve relevant ads. It’s how the company makes money.

Related post: Apple, Alphabet & the Privacy War

Senators Josh Hawley (R–Mo.) and Elizabeth Warren (D–Mass.) may be on opposite ends of the political spectrum, but they are aligned in their fight against big tech.

Forget utility; they want to put an end to personal data collection. For them, big tech is a logical and easy scapegoat.

It’s easy to see why …

Alphabet (GOOGL), the parent of Google, and Facebook (FB) are well-known and extremely profitable. They also excel at hoovering up personal information as they build software products people actual use and love.

Occasionally, that data is used for bad things.

Since the 2016 presidential election, no company has faced greater public scrutiny than Facebook. During the election cycle, the British data-mining company Cambridge Analytica misappropriated data from the social network. The firm then used sophisticated data analytics, coupled with misinformation campaigns, to target key swing voters.

Congressional hearings and stage investigations have been endless. There has been a steady stream of negative headlines. With CEO Mark Zuckerberg’s firm stance against fact-checking political ads, there will probably be even more.

Despite these headwinds, Facebook announced monthly active users topped 2.45 billion during the latest quarter, rising 8% year-over-year. The company is also more profitable than ever. The Menlo Park, Calif., firm earned $6.9 billion during the same time frame, an 19% increase from a year ago.

Related post: Facebook Locks Down Privacy, But Lawmakers Demand the Key

The politicos claim the public simply doesn’t understand the dangers. Hawley says big tech is tracking kids. Warren contends Silicon Valley is trampling the right to privacy. She cited the Times report as another alarming case why big tech companies should be broken up.

Except, Google and Facebook were not the subjects of the Times report.

Journalists obtained access to a database containing 50 billion cell phone tower pings collected from the smartphones of 12 million Americans. The data represents precise locations for a single device at a moment in time. For example, Times staff were able to track phones traveling to the estates of Tiger Woods and Johnny Depp. They followed the precise movements of a Secret Service agent as he traveled with President Trump to Mar-a-Lago and the West Wing.

There is a privacy problem. And regulation is coming.

Bipartisan support is overwhelming at this stage.

The opportunity for investors is the remedy.

When policy wonks in Europe decided to go after online privacy profiteers, the popular perception was their efforts would most impact big tech. They passed sweeping legislation called the General Data Protection Regulation. The new regulation, in a nutshell, said that companies must disclose when they are collecting any personal data.

The outcome has been people becoming reluctant to allow their data to be collected by companies without name recognition. People know Facebook and Google. So, they are more willing to trust them — at least, over other companies.

The Wall Street Journal reported in June that, since the GDPR, advertisers are spending more of their ad dollars with Facebook and Google.

But consumers are missing one key piece of information: They don’t know the current crop of location data companies that are the subject of the Times privacy report.

The data from the report didn’t come from a telecom company, the government or one of the big tech firms. The source, according to the journalists, was an obscure location data company: Foursquare.

While its tracking and gamification app may have faded from most smart devices long ago, according to a March story in Wired, Foursquare’s application programming interfaces (APIs) still live on in everything from Apple (AAPL) Maps, to Tinder (MTCH), Uber (UBER) and WeChat, the most popular social media site in China.

Those APIs are part of Pilgrim, Foursquare’s passive, always-on detection engine. The APIs use your phone’s radios and sensors to pinpoint your location and send it back to Foursquare servers for data analytics.

New domestic legislation, in my opinion, will have the same impact. Meaning nothing much will change in online privacy. But giants like Google and Facebook will come out ahead in terms of ad revenue.

Investors should not fear headlines about privacy. They should get ready.

While Foursquare is private, Google and Facebook aren’t. And for investors willing to do the research, there are other beneficiaries out there, ready to capitalize on this development. You should, too.

Best wishes,
Jon D. Markman

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