The FTC reprimanded Snapchat for falsely promising its users that their messages “disappear forever”. Photograph: Peter Macdiarmid/Getty Images

How much do we care about our online privacy?

This article is more than 9 years old

Tomas Chamorro-Premuzic, the Media Network’s resident business psychologist, examines the psychology of digital trust

A year and a half after Snowden’s initial NSA revelations, internet privacy has become one of the most widely discussed topics in media and technology. But there is little evidence that snooping habits have diminished. Even apps that emerged to ensure consumer anonymity, such as Snapchat and Whisper, have been under investigation for breeching their own privacy specs. But how much has changed in the mindset of consumers, and are we genuinely concerned about privacy?

In the early days, the internet seemed like a great place to hide. Ninenties chat rooms were populated by early adopters who pretended to be someone else to unleash their repressed sexual fantasies. It was very Freudian – an escapism from the mundane analogue world. Now it is much easier to hide offline than online, not least because everything we do online is measured, recorded, and sold. But that is about to change, too.

With the ascent of wearables and tracking apps, big data will quickly expand beyond the internet to colonise physical manifestations of human behaviour. As Sandy Pentland, MIT professor and pioneer in the field, notes: “Reality mining is about what you actually do; it’s not about how you imagine yourself. It uses the digital breadcrumbs left behind by cell phones and credit cards to quantify your life. The bottom line is that the data used in reality mining is more valuable because it’s how you actually live your life. The name is also a little scary, and that’s on purpose. People generally don’t realize how many breadcrumbs they leave behind in daily life.”

The only restrictions to what technology can do are ethical or legal, and in the absence of those it is crucial to understand people’s privacy concerns. After all, the success of any site or app does depend on user adoption. In reviewing recent psychological research, there are three important lessons about people’s attitude towards privacy and anonymity:

People don’t value their data as much as they say

Although consumers are quick to assign a high hypothetical price to their personal data, they would not pay as much to secure it themselves. This “endowment effect”, the subjective bias of thinking that something is worth more simply because it belongs to us, is well-known to behavioural economics and has been found in all areas of retail. The implication is that consumers care more about losing than gaining anonymity, so they will generally not go out of their way to recover the privacy they already lost or gave away.

This may explain why over 90% of e-commerce customers don’t trust companies to keep their data secure, yet they still keep using those sites. Independent research studies show that privacy concerns do inhibit online shopping, but given that most privacy policies could be simply summarised by saying that “there is no privacy on the internet”, it is astonishing that people are not more concerned.

People want to feel in control, even if they are not

Recent studies show that increasing individuals’ sense of control over their data leads to higher levels of online disclosure, including their willingness to be personally identified. This effect has been labelled the “control paradox” because by letting consumers decide precisely what information to share, they effectively end up sharing more and potentially becoming more vulnerable – victims of their own disclosure. Illusions of control may therefore emerge as a symptom of psychological manipulation.

This is consistent with scientific evidence indicating that while Facebook users have tended to increase their privacy settings over time (in the period between 2005-2011) they also increased the amount and level of personal information they share. Of course, perceptions of trust still matter as there is a direct link between how much people trust sites and the degree of personal information they disclose to them.

People find it easier to trust businesses, than people

For all the talk about the sharing economy and how customer-to-customer is disrupting business-to-customer, we are clearly not naturally inclined to trust others. This is why reputation is such a strong currency in the sharing economy. From eBay to Uber and Airbnb, the perceived risk of dealing with sole traders is mitigated only by their crowdsourced integrity – how honest and competent other users think they are.

Even romance is now subjected to the same sort of readiness checks. For example, Antidate, a mobile dating site, gets users to rate the accuracy of their dates’ profile picture after they meet, which ought to decrease the unrealistic proportion of overly flattering photos found in most dating sites.

Ultimately, the key question is not so much whether consumers will accept an even higher degree of datification and invasion, but what they will get in return. It is indeed a trade off between what we give and what we get, and there are reasons to be disappointed with the performance of most profiling algorithms.

Aside from Google’s search engine, few apps or sites appear to understand us well, and most people would probably not defect from Netflix, Spotify or Amazon if their recommendation engines were shut down. To be sure, the what we do and when and where all help to define parts of us – and hundreds of billions of dollars of business are generated by mining this information. However, we’re rapidly reaching the point where mining new sources of value from these dimensions is becoming increasingly difficult.

Right now, our digital self is not just managed and sold by others – such as our credit card company, our mobile company, our bank, our government – it is also highly fragmented. In other words, the main brokers of our online footprint have a schizophrenic view of our digital self, far less complete than the views our friends and colleagues.

There is surely another layer to be discovered, and in this deeper layer sits the answer to who it is that is using a device, who is searching, who is buying. In short, if companies can truly help consumers understand themselves better and make better decisions, they will have a clear incentive to be observed.

Tomas Chamorro-Premuzic is a professor of business psychology at University College London and vice-president of research and innovation at Hogan Assessment Systems. He is co-founder of metaprofiling.com and author of Confidence: Overcoming low self-esteem, insecurity, and self-doubt.