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The Market’s Law of Privacy: Case Studies in Privacy/Security Adoption


Chetan Gupta


May 2, 2017

This paper examines the hypothesis that it may be possible for individual actors in a marketplace to drive the adoption of particular privacy and security standards. It aims to explore the diffusion of privacy and security technologies in the marketplace. Using HTTPS, Two-Factor Authentication, and End-to-End Encryption as case studies, it tries to ascertain which factors are responsible for successful diffusion which improves the privacy of a large number of users. Lastly, it explores whether the FTC may view a widely diffused standard as a necessary security feature for all actors in a particular industry.

Based on the case studies chosen, the paper concludes that while single actors/groups often do drive the adoption of a standard, they tend to be significant players in the industry or otherwise well positioned to drive adoption and diffusion. The openness of a new standard can also contribute significantly to its success. When a privacy standard becomes industry dominant on account of a major actor, the cost to other market participants appears not to affect its diffusion.

A further conclusion is that diffusion is also easiest in consumer facing products when it involves little to no inconvenience to consumers, and is carried out at the back end, yet results in tangible and visible benefits to consumers, who can then question why other actors in that space are not implementing it. Actors who do not adopt the standard may also potentially face reputational risks on account of non-implementation, and lose out on market share.