What does Spotify's decision to share user data mean?

A recent Spotify ad campaign plays on how well the digital music-streaming company knows its users' tastes. The ads, found plastering New York City subways, showcase Tweets where listeners extoll how a Spotify playlist knows them well – “like former-lover-who-lived-through-a-near-death experience-with-me well.”

But Spotify will no longer just use this intimate knowledge of a user’s musical palate to generate personalized playlists. It's now using that information as a powerful leveraging tool for advertiser dollars: Spotify announced this week that it is opening up user data collected from its 70 million free subscribers for programmatic, automated advertising.

There is an important difference between this move and cookie-based targeted advertising, which tracks users' web histories across platforms. Spotify has not said that it will share the unique identities of users with advertisers. Instead, the shared data is limited to information like listeners' age, gender, location, music preferences, and some behavioral habits. This information will enable advertisers to pinpoint specific demographics for their ads on Spotify. Buyers will bid on ad spaces in real time– a trail-blazing step in the digital advertising world, and an example of the many ways digital companies wield the massive amounts of data that they have at their fingertips.

Spotify’s new private marketplace is a boon to advertisers who work with one of the three analytics and data broker companies that Spotify has partnered with for this program: AppNexus, Rubicon Project, and The Trade Desk. Advertisers who fall under their umbrella can now use the platform to bid on audio ad spots, according to a press release on the Spotify site.

On the other side of the earbud, consumers will hear advertisements tailored to them – or at least to who marketers think they are.

Those in the marketing world have repeatedly suggested that users like and benefit from this data-driven personalization of their digital experience, be it in advertisements or search results. But the data suggests something different.

A 2012 study by the Pew Center for Global Research found that nearly three-quarters of users said that collecting user information to personalize search results is “not okay.” Nearly 70 percent felt the same about having “online behavior tracked and analyzed” for the purposes of targeted advertising.

While this kind of data collection takes place across the board in the digital world, consumer protection advocates feel that the use of user data should be at the discretion of the individual, not the company.

“If, as advertisers claim, consumers are truly interested in receiving targeted ads, then they can affirmatively choose to do so, but the default is set the other way around because advertisers know that many people will not want to agree to that,” Susan Grant, the director of consumer protection and privacy at the Consumer Federation of America, tells The Christian Science Monitor. She adds that “opt-out” policies for data usage are often difficult to find and complete.

Or, in some cases, a digital company’s policy about collecting and sharing user data is more along the grain of a “tough luck policy,” meaning that if you don’t agree to the terms you can’t use the service, says Joseph Turow, associate dean for graduate studies at the University of Pennsylvania’s Annenberg School for Communication.

Professor Turow published research last year that was instrumental in debunking the idea that Americans accept online and in-store data collection because the targeted marketing gives them benefits.

Instead, his study found that consumers, particularly those who are well-aware of the techniques of data collection, accept it for a very different reason.

The study showed that “the more you know, the more you tend to be resigned” to the inevitability of data collection, Professor Turow tells the Monitor. “We suggest that that’s because people feel that they have no capacity to do anything about it.”

Turow proposes several solutions to the current state of largely unchecked data collection and selling, including stricter government regulations, and privacy agreements that are expressly emailed to users for them to review outside of the heat-of-the-moment as they download an app to use.

And as for agreement to those policies? They shouldn’t be a binary in or out, Turow says, but based on negotiation between company and consumer: "'You can keep my data for first party, but I don’t want third parties taking my data,'" for example. 

As it currently stands, companies like those that Spotify is partnering with can compile information across platforms to create a profile about a person for advertisers to access and use.

Spotify’s agreement to work with these programmatic, ad tech companies has a caveat important to users' privacy: it is based on demographics not identification of user identity. Essentially, advertisers can pinpoint users’ characteristics within Spotify, but will not follow them off the platform. However, language on Spotify's advertising page indicates that Spotify itself tracks “broader interests, lifestyle, and shopping behaviors” of users with data from third-party providers.

So while the streaming site's new arrangement doesn't mean that listeners will be hearing an audio ad for a pair of sneakers that they just browsed online, Spotify users will certainly be able learn more about how they are viewed as a market demographic – assuming they don’t mute their ads.