Outwit the Surveillance State

By Jon D Markman

Smartphones and the applications we use are tracking our every movement. It’s part of what some derisively call surveillance capitalism.

Using a leaked database and cell tower pings, reporters at the New York Times were able to track a Secret Service agent attached to President Trump’s security detail.

Politicians and privacy activists are outraged. Investors should see opportunity.

Smartphone applications like Google Maps are shockingly good. With location sharing enabled, everyone on the planet is just a few swipes away from never getting lost again, or unabashedly exploring the world.

If you’re planning a trip to Paris and want to live like the locals, Maps will help you select a place to eat and sleep based on your budget. Arranging rides or making sense of public transit to the Louvre or the Eiffel Tower is just a few taps away.

But there is a cost. Location sharing means constantly checking in with Google servers. Not only does the search know how to get where you want to go, it knows where you are, too. It uses sensors on your smartphone, a deluge of application programming interfaces, and its algorithms to make everything seamless. It also uses that data to serve relevant ads. It’s how the company makes money.

Senator Josh Hawley, a Republican from Missouri, and Senator Elizabeth Warren, a Democrat from Massachusetts, may be on opposite ends of the political spectrum but they are aligned in their fight against big tech. Forget utility, they want to put an end to personal data collection. For them, big tech is a logical and easy scapegoat.

Alphabet (GOOGL), the parent of Google, and Facebook (FB) and are well known, and extremely profitable. They also excel at hoovering up personal information as they build software products people actual use and love. Occasionally, that data is used for bad things.

Since the 2016 presidential election, no company has faced greater public scrutiny than Facebook. During the election cycle, Cambridge Analytica, a British data mining company, misappropriated data from the social network. The firm then used sophisticated data analytics, coupled with misinformation campaigns to target key swing voters. 

Congressional hearings, and stage investigations have been endless. There has been a steady stream of negative headlines.

Despite these headwinds, Facebook announced monthly active users topped 2.45 billion during the latest quarter, rising 8% year over year. The company is also more profitable than ever. The San Francisco firm earned $6.9 billion during the same time frame, an 19% increase from a year ago.

The politicos claim the public simply doesn’t understand the dangers. Hawley says big tech is tracking kids. Warren contends Silicon Valley is trampling the right to privacy. She cited the Times report as another alarming case why big tech companies should be broken up.

Except, Google and Facebook were not the subjects of the Times report.

Journalists obtained access to a database containing 50 billion cell phone tower pings collected from the smartphones of 12 million Americans. The data represents precise locations for a single device at a moment in time. For example, Times staff were able to track phones travelling to the estates of Tiger Woods and Johnny Depp. They followed the precise movements of a secret service agent as he travelled with President Trump to Mar-a-Lago and the West Wing.

The data did not come from a telecom company, the government or one of the big tech firms. The source, according to the journalists, was an obscure location data company.

Foursquare is one of these firms. While its tracking and gamification app may have faded from most smart devices long ago, according to a March story in Wired, its APIs still live on in everything from Apple (AAPL) Maps, to Tinder (MTCH), Uber (UBER) and WeChat, the most popular social media site in China.

Those APIs are part of Pilgrim, a passive, always on, detection engine. Its APIs use your phone’s radios and sensors to pinpoint location and send it back to Foursquare servers for data analytics.

There is a privacy problem. Regulation is coming. Bipartisan support is overwhelming at this stage. The opportunity for investors is the remedy.

When policy wonks in Europe decided to go after online privacy profiteers the popular perception was their efforts would most impact big tech. They passed sweeping legislation called the General Data Protection Regulation. The new regulation, in a nutshell, said that companies must disclose when they are collecting any personal data.

The outcome has been people are reluctant to allow their data to be collected by companies without name recognition. People know Facebook and Google. They don’t know the current crop of location data companies that are the subject of the Times privacy report.

The Wall Street Journal reported in June that since the GDPR, advertisers are spending more of their ad dollars with Facebook and Google.

New domestic legislation, in my opinion, will have the same impact.

Investors should not fear headlines about privacy. They should get ready. They should begin buying the beneficiaries like Alphabet and Facebook on pullbacks.