This is the second part in a three-part series that is running this week at HuffPost on why lost privacy online matters for economic equity in our economy. The first part looked at the ways lost privacy leads to greater economic inequality in our economy and how Google users are encouraged to give up that personal data without recognizing its real value.
While many commentators focus on how individuals use various Google tools, but those tools are not Google's business but a way to encourage those individual users to part with personal data, which can then be resold to advertisers. The question is why user information is so useful to companies and why they pay Google so much for the precision in user targeting that it can deliver.
"Pain Points" and Price Discrimination: The nicest version of why companies pay so much is that it helps them find the customers most likely to be interested in their products, and that's no doubt part of it. But the darker version is that it also helps them differentiate between different customer segments and target particular offers to different audiences. One great advantage of online marketing is that it facilitates what economists call "price discrimination", selling the same exact good at a variety of prices. This is based on the reality that people have different maximum prices that they are willing to pay, a so-called "paint point" after which they won't buy the product.
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