Amazon: Privacy Concerns, Digital Music Lockers and Pandora’s Box

As I was thinking about the competitive landscape for e-Commerce and Amazon’s foray into the streaming music scene, it occurred to me that Amazon has a huge data mining opportunity here and that this will almost certainly raise privacy concerns.

At present, the story in the press is about the music industry’s concerns over licenses. Sony has said it is not happy that Amazon has launched its product without licensing agreements from the music industry given that Apple and Google are negotiating agreements. Ostensibly, this is what has given Amazon the jump on those competitors.

But I want to talk about something else: privacy. Since Amazon has launched a co-branded MP3 Cloud Player/Cloud Store, it is clear the retailer is looking to better monetize its online music business by integrating a music player. Yes, Amazon is a big player in the storage business now. But first and foremost, Amazon is about selling things. And by allowing music fans to store their private collections in ‘digital lockers’ controlled by Amazon, the online retailer gains huge insight into music preferences that goes even further than the current streaming music leader Pandora.

It wouldn’t be bold if I used the Pandora name to make a pun and say that Amazon has opened a Pandora’s box in the music world by tying musical preferences and shopping habits together so tightly. That has positive benefits for user’s in terms of musical discovery. But it also creates some privacy concerns.

I am uploading my own digital music collection to Amazon’s Cloud Drive as we speak. And I have played around with the App on my Android-based tablet and phone as well as on my PC. I think it’s a great product. It has most of the basic functionality you need in a music player, you can make and edit playlists of songs. You can play songs by artist or album. And you can do basic searches throughout your library. You can switch between your ‘local’ music collection on your device and music on the cloud almost instantaneously. The user interface is clean and simple on all three platforms and the music plays almost as soon as you click on a song, whether on your device or on the cloud.  I should add that the music streams back to you at the same audio quality as the original audio file. So, this is a high quality setup.

Here’s where I see things going from here:

• if you’ve ever been on Amazon.com you know that they have a first class purchase recommendation engine that they have generated via customer click through, purchase and reviews. Amazon generates an enormous amount of extra spending per customer by recommending related products to users at every turn of the shopping experience. But Amazon also has a large database of product recommendations that it uses to advertise on the web based on individual customer purchasing and browsing habits.
• With this new streaming product, Amazon at once gets ‘click through’ or ‘browsing’ data at a customer level as well as a large cross-customer database of musical preferences. If I am listening to an album by Usher and then browse through the R&B section to finally click onto a song by Alicia Keys, Amazon should know and record this.
• That means that Amazon can go much further than Apple in terms of user tastes. Amazon at once becomes a cross between streaming music provider Pandora, the iTunes Music Player and the iTunes Music App. It gets to not only catalogue music libraries and spit out purchase recommendations as Apple already does with iTunes, it also gets to track which songs you listen to on the fly as Pandora can do.

Now, I don’t use iTunes that often and I have their Genius recommendation engine turned off, so I don’t know whether Apple can do this with iTunes now.  But what is significant about Amazon’s service is that it extends cross platform from the desktop to other devices. People are spending much less time on standard computers and much more on mobile devices. So, this opens up better advertising and ecommerce opportunities for Amazon. Pandora has to be threatened by this since Amazon only needs to secure the licensing and it can easily move from its present product to one of the serendipitous radio-like streaming that Pandora provides.

The question, of course, is how this will go down with customers. The more the web extends into the mobile space, the greater the privacy concerns are going to be.  And the move into cloud computing in which people store their personal files online creates the potential for misuse of data or the association of one’s personal details with the specific files one stores.  Amazon has already sorted its digital locker by type of file: music, photos, video, and files. So I imagine the data mining techniques for music will be vastly different than those it employs for files. Nevertheless, the concern should be there.

I am torn on this one. I think the Amazon Cloud Music Player is very cool.  I can think of a hundred different ways and places I can use it. What’s more is I want Amazon to emerge as a credible alternative to Apple in the online music world. Perhaps this can loosen the iTunes – iOS tie that I find so restrictive. At the same time, this transformation of the digital age into something where all of one’s ‘life’ data is stored somewhere remotely on the Internet is a change that is disconcerting for me. The potential misuse of private data comes not just from storage providers but also from hackers and government.  It is with government where the real threats lie.