Ironically Facebook is our inspiration, says privacy-by-design social start-up Respect Network
CEO Drummond Reed explains how blending the Facebook and credit card business models can create a network where users control their own personal data
The fallout from Snowden's revelations as well as the steady stream of news stories about the ways that tech giants use their customers' data has brought about a number of privacy-by-design innovations, such as the Blackphone, Lavaboom encrypted email and now the Respect Network, a coalition of 71 "founding partners" which describes itself as the world's first global network for trusted private data sharing.
"A lot of us saw this privacy crisis coming. It's a result of people communicating over the internet which is after all an open public network", said CEO Drummond Reed, who has spent 15 years working on communication, identity and data transfer standards.
The idea for creating a private data sharing network came from a surprising source.
"The total irony was our inspiration was Facebook," Reed said, not, obviously, referring to that social network's notoriously Machiavellian attitude to its members' personal data but rather the way that its membership has rocketed to over a billion members by allowing easy sharing of data at very large scale.
"With Facebook all you can do is click the 'I agree' button... If a billion people joined a network where Facebook monetises their details, how many would join a network where there is privacy by design?" he said
That's the crucial question. One reason that social networks have grown so rapidly is that registration to Facebook, LinkedIn and Twitter is free. The Respect Network levies a $25 (£17) one-off joining fee, which is where a second source of inspiration comes in.
Credit card model
"The inspiration for our business model was the credit card networks. They have a simple but proven model. When businesses join the network they agree to pay a small percentage of each transaction and that interchange fee is split between their bank and the network and the consumer's bank and a little bit goes back to the consumer as a reward," Reed explained.
Rather than transactions, the Respect Network model sees businesses charged a "relationship fee" when they connect to a consumer's personal cloud hosted on the Network. They will be paying for access to the data that the customer agrees to show them. The value of the relationship fee, Reed said, will be determined by "market dynamics".
"These relationship fees will be a sustainable way to pay for the network. As a consumer, when you connect to a business on the network, let's say John Lewis, and you want to share a clothing profile so you only see clothes you're interested in, they will have a button called Respect Connect on their site. Click on that and a third of the relationship fee goes to you [the consumer]."
The remaining two thirds of the fee are split between the Network and the cloud service provider, to fund the cost of hosting the member's personal cloud.
With access to the consumer's personal cloud, the affiliated business will be able to offer a more tailored service based and to build a trusted relationship with the customer.
Members have full control of their data and only share it with people or businesses they want to over a decentralised peer-to-peer network. As such the system depends heavily on reputation, Reed said.
"Anyone signing up has a legal remedy, it's a legal contract, but these are hard to enforce, so the whole network is reputation based, like Ebay, Yelp, TripAdvisor and Reddit. They've all proved you can scale reputation, so we're going to apply reputation to incentivising good behaviour. If a company breaks its promise or doesn't have good data security its reputation will suffer - and very quickly."
Network effect
So will it take off? Obviously any network has to reach a critical mass before it starts to grow sustainably. While the $25 registration fee might be seen as a barrier to growth Reed says it is both a crowdfunding exercise and a proof of concept. He aims to sign up a million members by the end of the year.
"If we get a million people signing up to a secure private network that will send out a huge signal and businesses will say, hey we get it, we're willing to pay the relationship fee."
Ultimately the success of the Respect Network will depend on how much people really value the privacy of their data and are are prepared to pay for it, how smoothly it works and how many large businesses sign up - at this stage the founding partners are mostly quite small. The organisation has certainly done its homework, spending a decade developing a technical and legal framework, but it's now a matter of building an ecosystem around it. In this Reed said applications will be crucial.
"What we believe will make a difference and really drive growth is applications and features. Almost half of our founding partners are application developers," Reed said.