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By 2016–2019, greater consumer awareness of trackinghad spawned significant distrust46%of American consumersbelieve their personalinformation is less secure nowthan it was 5 years ago66%of American consumersdo not trust the government toprotect consumers’ interests65%of American consumerssay they are slightly or not atall confident that personaldata is privateSource: Aaron Smith, Americans and Cybersecurity,PEW RESEARCH CTR.(Jan. 26, 2017); Consumer Voices Survey I, CONSUMER REPORTS RESEARCH (Feb. 16, 2017)27

A slew of data breaches and scandals then further eroded consumers’expectation that their information could be kept safe and privateMARCH 2018MARCH 2018Equifax Data BreachCambridge AnalyticaMarriott Data BreachRevealed to have affected at least 148million Americans.Enabled the harvesting of privateinformation from over 50M Facebookprofiles without user permissionExposed the data of 383M guests,including credit card, passport, email,phone, date of birth, and addressSEPTEMBER 2017Source: Kaya Yurieff, Equifax Data Breach: What You Need to Know, CNN (Sept. 10, 2017); Equifax Data Breach Affected 2.4 Million More Consumers, CONSUMER REPORTS (Mar. 1, 2018); Cybele Weisser, Equifax Data Breach Puts Spotlight on How Credit Agencies Work, CONSUMER REPORTS(Oct. 3, 2017); Matthew Rosenberg, Nicolas Confessore, & Carole Cadwalladr, How Trump Consultants Exploited the Facebook Data of Millions, N.Y.TIMES (Mar. 17, 2018); Andrew Perrin, Americans are Changing Their Relationship with Facebook, PEW RESEARCH CTR. (Sept. 5, 2018); Chris Isidore,Marriott Hasn’t Paid the Price for its Massive Data Breach, CNN (May 10, 2019)28

Regulatory interventions have already begun On January 1, 2020 the nation’s firstcomprehensive commercial privacylaw, the California ConsumerPrivacy Act (CCPA), went into effect. CCPA is overwhelmingly popular,with 88% of California voters infavor and just 5% opposed. Under the CCPA, Californiaconsumers can:- Require that their personal information notbe sold by specific companies- Get a copy of information that specificcompanies have about them- Request the deletion of their personalinformationCCPA is California-specific, but other US statesare working on similar new laws and initiatives.29

Data privacy can feel like an arms race between an increasinglysophisticated consumer and companies trying to stay one step ahead Although consumers have gainedtech literacy over time, they need todo ever more to protect the privacyand the security of their data Ongoing high-profile privacyrevelations contribute to a sense ofconsumer helplessness Consumers remain concernedabout their privacy but lackknowledge or meaningful choicesHalf of consumers believe it’s “part and parcel” of being onlinethat people will try to cheat or harm them in some way.Source: Consumer Attitudes Toward Online Tracking, 1995-2019, page 4, 6. The 2020 Digital Attitudes Report, Doteveryone, Page 3.30

We’re at a criticaljuncture for consumerprivacy in the U.S. Notice and consent has enabled a situation where the privacypractices of many products have drifted far from consumers’preferences. Consumers have believed for decades that they have more rightsand protection online than they do. The techniques to protect user privacy have remained the samesince the late 90s. The majority of consumers today know they are not in control oftheir data. There is a significant gap between consumer understanding oftracking technology & the means to control it.31

Concern about the power of big tech and frustrationfrom privacy scandals are increasing demand forboth regulation and consumer privacy solutions.32

Marketing messages from big tech companies are starting toreflect consumers’ privacy demandsFacebook CEO Mark Zuckerberg touting privacyfeatures at April 2019 developer conference.Source: Consumer Reports commentaryApple iPhone privacy digital and billboardcampaign, January 2019.Google privacy settings print/billboardcampaign, September 2019.33

SECTION 3ConsumerAttitudes Today34

Nearly two thirds of smart product owners worry about loss of privacywhen buying them for their home or family62%OFSMART PRODUCTOWNERSsaid they worry about potential loss ofprivacy when buying smart productsConsumer Reports nationally representative survey of 5,085 adult U.S. residents fielded Feb 7 - 21, 202035

Concern about how much data and about the privacy ofpersonal data companies collect and store about youBase: All respondentsThree quarters ofconsumers are at leastmoderately concernedabout the privacy oftheir personal dataConcern about the PRIVACY of your personaldata that companies collect and store about youConcern about HOW MUCH data companiescollect and store about rnedSlightly/Not at allconcernedConsumer Reports nationally representative survey of5,085 adult U.S. residents fielded Feb 7 - 21, 202033%26%27%36

96% of Americans agree that more should be done to ensure thatcompanies protect the privacy of nies should be required to delete thedata they have about you upon your request.Companies should be required to give youaccess to the data they have about you.67%OFAMERICANSSAY.63%OFAMERICANSSAY.There should be tougher penalties, such ashigh fines, for companies that don’t protectyour privacy.There should be a national law that sayscompanies must get your permissionbefore they share your information.Consumer Reports nationally representative survey of 5,085 adult U.S. residents fielded Feb 7 - 21, 202064%OFAMERICANSSAY.60%OFAMERICANSSAY.Companies should be prohibited from sharingdata with third parties.Companies should be required to be moretransparent about their privacy policies so thatconsumers can make more informed choices.37

More consumersbelieve companiesshould be mostresponsible for userprivacy than believegovernments should.Over three-quarters ofAmerican consumers believeresponsibility for protectingconsumer privacy should notfall to individuals.Consumer Reports nationally representative survey of5,085 adult U.S. residents fielded Feb 7 - 21, 2020Who should be MOST responsible for protectingconsumers’ online privacy?50%40%42%30%32%20%17%10%0%3%CompaniesFed. Govt.IndividualsState Govt.2%Other3%No One1%Unsure38

U.S. Data Breaches by Sector1,6001,4001,200Data breachesare on the rise1,0008006004002000200520062007BusinessSource: Identity Theft Resource 14Government201520162017Financial39

At least 30% ofAmerican consumers,and maybe ashigh as 45% haveexperienced a databreachHave you ever personally experienced a data breach?Unsure15%No55%Yes30%Consumer Reports nationally representative survey of5,085 adult U.S. residents fielded Feb 7 - 21, 202040

Consumers are willing to pay companiesto be more responsibleWould you be willing to pay to use searchengines such as Google, in exchangefor these companies to STOP collecting,sharing, or selling your data?45% of American consumers indicated a potentialwillingness to pay for online privacyConsumer Reports nationally representative survey of 5,085 adult U.S. residents fielded Feb 7 - 21, 2020Unsure16%No39%Yes, definitely7%Yes, depending on cost38%41

Privacy and security present sizable andrapidly growing opportunitiesConsumer focus on privacyand security is rising.Data privacy and securitycan be a point of beneficialproduct differentiation.Benefits may come in theform of pricing power,profitability, market share,goodwill, talent attraction,or others.42

With smartphones,perceived privacy &security factor intoreasons Android usersswitched to an iPhoneAndroid users who have switchedfrom an Apple to an Androidin the past five yearsApple users who have switchedfrom an Android to an Apple inthe past five yearsWanted a phone with better protections for my privacy sothat my data isn’t stored or accessed by anyone but meWanted apps that are better vettedfor security and privacyConsumer Reports nationally representative survey of5,085 adult U.S. residents fielded Feb 7 - 21, 20208%An Apple/Android is safer and has moresecurity features than other phones24%6%18%1%15%43

For those consideringa switch to an iPhonefrom an Android,privacy or securityreasons were cited by4 in 10 Android usersAndroid users who haveconsidered switching to an Apple inthe past five yearsApple users who haveconsidered switching to an Android inthe past five yearsAn Apple/Android is safer and has moresecurity features than other phones26%4%25%Want a phone with better protections for my privacy sothat my data isn’t stored or accessed by anyone but me9%21%Want apps that are better vetted for security and privacy5%Consumer Reports nationally representative survey of5,085 adult U.S. residents fielded Feb 7 - 21, 202044

“Concerned, non-switchers” could be“low-hanging fruit” for conversion to productswith better privacy and securityConsumer Reports nationally representative survey of 5,085 adult U.S. residents fielded Feb 7 - 21, 202045

Just as convenience carries switching power for Apple iPhone users, so too does privacyTop reasons for recently switching type of phoneConvenience/Cost vs. Privacy-Driven ChoicesReasons why Android users have switched to iPhoneReasons why iPhone users have switched to Android 34% say “I want the same phone brand as family and friends” 24% say “An Apple iPhone is safer and has more security features thanother phones” 21% say “The store where I bought it was providing good deals on iPhones” 20% say “I wanted a phone that would be compatible with other devices inmy home” 39% say “I wanted a phone that I felt provided more value for the price” 36% say “I wanted a less expensive phone” 32% say “I wanted a phone with more options for flexibility andcustomization”Base: Apple iPhone users who have switched to an iPhone from anAndroid in the past five yearsBase: Android users who have switched to an Android from an iPhone inthe past five yearsConsumer Reports nationally representative survey of 5,085 adult U.S. residents fielded Feb 7 - 21, 202046

There is also staying power to privacy with Apple iPhone users, just as there is for convenienceTop reasons for not switching type of phoneConvenience vs. Privacy-DrivenReasons why iPhone users have not consideredswitching to AndroidReasons why Android users have not consideredswitching to iPhone 41% say “It’s what I’ve been using for years and don’t want to learn a newoperating system” 37% say “I have other Apple products and apps that are all synced up andit’s too costly, difficult, and time-consuming to start over” 28% say “I like the protections that an iPhone provides for the privacy sothat my data isn’t stored or accessed by anyone but me” 27% say “I just haven’t thought about it. I’m happy with my iPhone” 23% say “I heard that an Apple iPhone is safer and has more securityfeatures than other phones” 37% say “It’s what I’ve been using for years and don’t want to learn a newoperating system” 33% say “I just haven’t thought about it. I’m happy with my Android” 18% say “I have other Android products and apps that are all synced up andit’s too costly, difficult, or time-consuming to start over”Base: Apple iPhone users who have had their iPhone at least five yearsand have not considered switching to an AndroidBase: Android users who have had their Android at least five years andhave not considered switching to an iPhoneConsumer Reports nationally representative survey of 5,085 adult U.S. residents fielded Feb 7 - 21, 202047

Privacy and securityare important factorsin web browser choice,especially on desktop49%It’s the default browser on myphone/desktop/laptop35%32%42%It’s what I’ve always used41%41%21%Why do you typically use yourpreferred browser on each device?Faster than other web browsers28%28%21%SmartphoneThe interface is easier to use than others26%25%LaptopDesktop18%Better than other browsers formaintaining my online security21%24%11%Easy to customize settings to add extralayers of privacy and protection16%15%More privacy tools so there is less datacollection and tracking than otherbrowsersConsumer Reports nationally representative survey of5,085 adult U.S. residents fielded Feb 7 - 21, 20209%13%14%48

The privacy & securityconscious consumer classseems to include more menand people of color.Consumer Reports nationally representative survey of5,085 adult U.S. residents fielded Feb 7 - 21, 2020Gender:We define “more men” as a higherpercentage of males than females.Race/Ethnicity:We define “more people of color” as a higherpercentage of Black, non-Hispanic andHispanic Americans than white, non-Hispanic.49

We asked American Consumers“Would you be willingto pay to use searchengines such as Google,in exchange for thesecompanies to STOPcollecting, sharing, orselling your data?”And we learned: Americans with higher incomes are more likely to say they would considerpaying depending on the cost. A larger percentage of Black, non-Hispanic and Hispanic Americans (11%)than White, non-Hispanic Americans (5%) say they would definitely pay Americans who are “extremely or very concerned” about the privacy of thepersonal data companies collect and store about them are more likely tosay they would pay or would consider paying depending on the cost. A larger percentage of Americans who experienced a data breach (52%)than those who have not (40%) would pay or would consider payingdepending on the cost Americans who say they considered switching their phone type for aprivacy-oriented reason are more likely than those who haven’t to say theyare willing to pay.Consumer Reports nationally representative survey of5,085 adult U.S. residents fielded Feb 7 - 21, 202050

SECTION 4QuantifyingConsumer Preference51

CR conducted a conjoint analysis to help quantify howconsumers value privacy and security in purchasing behaviorConjoint analysis is atechnique to determinehow people value differentattributes (feature, function,benefits) that make up anindividual productor service.Consumer Reportsconducted a conjointanalysis to drill intounderlying consumerpreferences in six productverticals across hardwareand software.The goal was to identifyspecific opportunitieswhere companies mightcompete / differentiate.52

We focused on product categories acrosshardware and softwareVPNsHealth arsWe also selected for product category representation across Health, Security,Entertainment, Technology, and Automobiles.Selection methodology described in Appendix53

1,501 consumers 3%34%21%39%30%28%20%18%Male49%Gen ZMillennialsBaby Boomers0%Ethnicity12% 35KRegionAfrican American13%Asian Other6%18%37% 35K- 49.9K 49.9K- 74.9K 75K Life Stage21%23%Hispanic15%Caucasian66%Gen X10%Young Single23%Older Single19%Young Couple6%Older Couple18%Young Coupled Parent12%Older Coupled Parent15%Single Parent8%54

Each participantreacted to 10hypothetical products.The hypothetical productswere randomly generated anddemonstrated varying productconfigurations based onpre-defined feature levels for: Price Reliability Performance Ease of Use Personalization Privacy Security55

Across all products tested, price had the most impactPrivacy and security had broad impact and were prioritized over other 8107High ImportanceLow ute Impact Scores: These scores are indexed Importance scores. An average impactful scorewould sit at 100, with scores above 100 having greater impact and below 100 having less. Thesescores are representative of importance at an entire feature level.56

Across all categories, customers were willing to pay morefor the better and best privacy features on the marketCustomers also expressed a willingness to pay more for the betterand best security features across all categories.VPNHealth Apps 15 12 9 6 3 0PrivacySecurity 8 7 6 5 4 3 2 1 0Security Cameras 100 80 60 40 20PrivacyIncrease in WTP from Good to BetterSecurity 0PrivacySecurityIncrease in WTP from Better to Best57

Across all categories, customers were willing to pay morefor the better and best privacy features on the marketCustomers also expressed a willingness to pay more for the betterand best security features across all categories.Smart Speakers 80 70 60 50 40 30 20 10 0PrivacySecurityStreaming Services 8 7 6 5 4 3 2 1 0Cars 20,000 15,000 10,000 5,000PrivacyIncrease in WTP from Good to BetterSecurity 0PrivacySecurityIncrease in WTP from Better to Best58

Software offerings showed a higher total opportunity aroundprivacy and security than hardware artSpeakersStreamingServicesCarsPrivacy OpportunitySecurity OpportunityTotal OpportunityPrivacy and Security Opportunity determined based off of increase of WTP at “Best” level in comparison to the maximum price possible. Total opportunity determined by combination of those two metrics.59

In conclusion, Health, Technology, and Security companies thatprioritize consumer privacy and data security shouldsee significant upsideMost consumers base theirchoices on convenience andcost factors, but nearly allremain concerned aboutprivacy and security.There are discernablecustomer classes thatprioritize privacy and datasecurity in their decisions.In four of the six productcategorizes analyzed, privacyand security features hadabove average impact onconsumer decisions.60

SECTION 5Moving Toward aMarket for Privacy61

With current marketdynamics, privacy willcontinue to ascendDEMANDEmpower consumers to makebetter decisions & take actionRULE-MAKINGSpur rulemakers to prioritize therights and interest of consumersSUPPLYInfluence companies to actresponsibly & make better products62

The regulatory tide on consumer privacy is already turningCultural and societalattitudes towards dataprivacy have irreversiblyshifted.100 privacy and datagovernance-related lawsintroduced at state andfederal levels since the2018 California ConsumerPrivacy Act.These laws could ultimatelydisrupt data-drivenbusiness models that relyupon the m

This is what drives us at Consumer Reports 8. So Consumer Reports and Omidyar Network teamed up to examine evolving consumer attitudes toward privacy and quantify privacy’s market impact