Personal data is to the tech world what oil is to the fossil fuel industry. Thats why companies like Amazon and Facebook plan to dig deeper than we ever imagined
What if a cold drink cost more on a hot day?
Customers in the UK will soon find out. Recent reports suggest that three of the countrys largest supermarket chains are rolling out surge-pricing in select stores. This means that prices will rise and fall over the course of the day in response to demand. Buying lunch at lunchtime will be like ordering an Uber at rush hour.
This may sound pretty drastic, but far more radical changes are on the horizon. About a week before that report, Amazon announced its $13.7bn purchase of Whole Foods. A company that has spent its whole life killing physical retailers now owns more than 460 stores in three countries.
The acquisition Amazons largest ever struck some observers as strange. But Amazon tends to run about a decade ahead of its rivals. It owes its success to big, counterintuitive moves. This is a company that saw the power of online retail in 1994, and of cloud computing in 2006. Its purchase of Whole Foods represents a similarly far-sighted incursion into a lucrative new frontier.
Amazon isnt abandoning online retail for brick-and-mortar. Rather, its planning to fuse the two. Its going to digitize our daily lives in ways that make surge-pricing your groceries look primitive by comparison. Its going to expand Silicon Valleys surveillance-based business model into physical space, and make money from monitoring everything we do.
Silicon Valley is an extractive industry. Its resource isnt oil or copper, but data. Companies harvest this data by observing as much of our online activity as they can. This activity might take the form of a Facebook like, a Google search, or even how long your mouse hovers in a particular part of your screen. Alone, these traces may not be particularly meaningful. By pairing them with those of millions of others, however, companies can discover patterns that help determine what kind of person you are and what kind of things you might buy.
These patterns are highly profitable. Silicon Valley uses them to sell you products or to sell you to advertisers. But feeding the algorithms that produce these patterns requires a steady stream of data. And while that data is certainly abundant, its not infinite.
A hundred years ago, you could dig a hole in Texas and strike oil. Today, fossil fuel companies have to build drilling platforms many miles offshore. The tech industry faces a similar fate. Its wildcat days are over: most of the data that lies closest to the surface is already claimed. Together, Facebook and Google receive a staggering 76% of online advertising revenue in the United States.