Apps in Less Competitive Markets Collect More User Data
ResearchStudy on Competition in Digital Markets
Data play a crucial role in digital markets, including the market for mobile applications. At present, however, app markets are dominated by a few, highly successful and mostly free apps. Apps with high market shares operating in a weak competitive environment are more likely to collect large amounts of privacy-sensitive user data and share them with third parties. This is the result of a joint study conducted by ZEW Mannheim, the University of Zurich and the University of East Anglia.
The study investigates how the lack of competition is related to the collection of privacy-sensitive user data in online app markets. To this end, the researchers analysed and collected information on approximately 1.5 million apps and their competitive environment in the Google Play Store on a quarterly basis between October 2015 and January 2018. The researchers also developed innovative measures to quantify competition and data collection in online markets.
For every app, the Google Play Store proposes other apps that are similar in terms of their content and function, a feature the researchers used to map a network of relevant competitors. The apps’ market shares were then determined based on the number of their installations and ratings. Finally, the permissions requested by an app allowed the authors of the study to specify the extent to which an app has access to user data. In total, the researchers identified 25 privacy-sensitive permissions, including access to location data or users’ contacts.
Apps with high market shares are more likely to share data with third parties
The results of the study indicate that almost one third of the more than 30,000 app markets identified in the study are highly concentrated, meaning that this market is dominated by only one or two apps. The researchers also found that more than half of the apps request at least one privacy-sensitive permission.
The results further show that apps operating in such highly concentrated markets with high market shares are also more likely to gather more user data than apps operating in more competitive markets. This finding remains robust even in cases where some of these permissions are crucial to the functioning of the app, e.g. in the case of location data, which are indispensable for the functioning of navigation apps. This relationship is particularly strong for apps that are free of charge. It is, however, not only data collection that is of interest to app providers. Apps that are active in concentrated markets and have a high market share are also more likely to share data with third parties, such as advertising companies or social networks, or to analyse user behaviour.
“The increased collection of data and resulting loss of user privacy is related to the app’s market power,” explains Dr. Reinhold Kesler, a researcher at the University of Zurich, co-author of the study and a former ZEW researcher in the “Digital Economy” Department. “In the mobile app market, data are increasingly becoming a means of payment.”
Data thus play a key role not merely for apps but ultimately also the success of many digital companies. “For competition authorities, the study also highlights the importance of the protection and portability of data in online markets. This is also reflected in the decision of the German Federal Cartel Office, which views Facebook’s data policy as an abuse of its dominant position in the social networks market,” concludes Kesler.
For more information please contact
Dr. Reinhold Kesler
Researcher Universität Leipzig
Tel.: +41 (0)44 634 21 10
reinhold.kesler@business.uzh.ch