Anonymity, Autonomy, and the Collection of Personal Data: Measuring the Privacy Impact of Google's 2012 Privacy Policy Change

Abstract

One of the most vexing problems in privacy policy is identifying consumer harm from unwanted observation; because it is highly subjective and is likely to vary greatly throughout the population, it doesn’t lend itself to easy measurement. Yet, these types of situations increasingly are the focal point of privacy policy discussions. The primary approach to attempt to quantify subjective harms has been to measure consumers’ willingness to exchange personal data for money in an experimental setting. This study takes a different tack, using field data to measure actual consumer response to a real-world reduction in the anonymity of online search. In March 2012, Google began to combine user information across platforms. To the extent that Google’s policy change reduced the anonymity associated with Google search, it may have reduced incentives to search sensitive or topics. Using a difference-in-difference estimator with top non-sensitive search terms as the control group, the results suggest that there was a small and short-term reduction in the Google Trends scores for sensitive search. There is no measured difference in reaction between high- and low-privacy demand states. Overall, the results indicate that any consumer welfare loss from Google’s policy change was small, and likely swamped by the demand-increasing impact of customization made possible from the cross-platform data sharing. That there is no measurable long-term substitution out of sensitive search may reflect the privacy advantages of searching for sensitive information on Google versus seeking the same information in an interpersonal setting. These findings suggest that privacy policy changes that are publicized should be treated like ordinary price changes — causing marginal consumers to exit and reducing consumer surplus for those who remain — not opportunities for regulatory intervention.

Keywords: Search, Google, Privacy, Anonymity, Information

JEL Classification: D12, D83, K24, L86