I'm not claiming that it is the way the world should work. There are a number of things that need to change before the data can change. I think that in the next 5-10 years there will be a lot more stability, with or without government interference in the online space. Before I get into that though, I think more people need to realize that data has always been around.
Businesses have been collecting data on customers for all of eternity. Businesses selling and sharing this data has always been around. Businesses specifically formed to collect, organize, and resell this data have always been around. My company has a database of every c-level employee in like 20,000 companies. Name, age, gender, position, company, email address, mailing address, phone number, personal notes, length of time at company, employees under them, etc. This costs about 20k/month to "rent."
There are other databases specifically just for email addresses of shopper marketing managers. There are databases specifically for mailing addresses of people who own homes and use Direct TV. How do you think you get flyers in the mail? How do you think you get phone calls from telemarketers? My ex's company has a database of every apartment complex in the greater Los Angeles region: address, onsite manager, maintenance manager, owner of property, property management company, other companies the management company owns, number of units, size of lot, size of each apartment (2bd/2bth etc), date built, features (carpets, pools, garages), phone numbers, email addresses, etc.
These people didn't give these company's permission to sell their info. Some is public record. Some is publicly available. Some is collected via the internet now. Some was collected by hand before. Who knows. It's always been there.
The amount of data that the internet provides is astounding. The amount and type of data your can collect, store, and sell is insane. It's super easy to have data as a revenue stream because new companies are willing to buy this data to make new databases (and there are still advertisers). The ease of sharing/selling this data is unlike anything we have ever seen before. It's so easy to collect. It's so easy to sell. It's so easy to advertise and target.
But why are people using it in the ways we are seeing in the first place?
First, companies are making money in completely new ways due to the new technologies, rapidly improving technologies, non-competitive environment, and "fresh" arena to play ball in.
This is why I say we will be seeing it level out. There was only one point in time where Amazon could be created. There will never be another Amazon. Every company that competes with Amazon, gets bought by Amazon or dies. Read The Everything Store if you want to know more.
There aren't case studies or universities or standards in place for the way companies are doing things today. No one truly knows what is successful and why. People are copying each other but not really. 1000 companies enter and try to make money in 1000 different ways. Even the exact same service (uber and lyft) and making money from a variety of different sources and in different ways.
This leads to an environment where both new online services and traditional businesses entering the online space are trying anything, and a number of things simultaneously, to make money to survive.
Second, a lack of a plan / accidental massive success / ease of starting online.
Unlike traditional business, it is actually possible to have a million dollar online service in 10 days with no employees, no tax forms, no llc, no nothing. Look at Flappy Birds. Holy shit. 50k/day! One guy!
Traditional business you need money to start. You need a property, you need some recourses, you probably need some employees, you need to figure out taxes once you have these things. Before you get a loan or spend you savings, you make a plan. Flappy birds did not have a plan. Traditional business is also limited by the amount that can be sold because of physical impossibilities. A book store can only sell as many books as they can ring up in a day. Amazon can sell as many books as they want in a day because 1000 people could buy the same book at the same time and it would process.
Traditional businesses are seeing these successful companies with multiple revenue streams and want a piece of the pie. NYTs. They sell papers. Oh wait. Now they are threatened because everyone goes to Gawker for news. How does Gawker make money? How does NYT survive? Oh data and ad dollars? Okay. Now NYT makes money from papers, from online subscriptions, from ad dollars, and from data.
New startups see that data is a viable source of income. So they use it.
Forth, bigger fish to fry.
The rapid growth rate of successful new online companies make it hard for the founders to keep up with implementing privacy features, focusing on data of users, or taking the time to even think about those things. Most lack of plan. Most have the knowledge that their 10m users may disappear when the next startup comes along. This adds to the urgency of making money now and trying to keep your business alive which results in a disregard for privacy of your users. Now see copycats.
Fifth, users are idiots and users don't like to pay
Users are using a popular service because it is popular. They have not taken the time to know what the company does with the data. Most don't care. Most want XYZ features and most won't pay because online services are seen as free. Whether it's because they used that specific service for free (before it monetized) or because the larger online world is just generally "free". More on this here. Seriously. Listen to this.. Furthermore, uninformed users currently outnumber informed users.
So how does one start a business with little capital, no plan, in a space where users aren't expecting to pay, and still make money? Data. How does a traditional business start making money in this space? Data. Multiple revenue streams? Data. Getting a service online to have a ton of users? Make it free. Easy monetization of a now-popular but still-free service? Data.
You don't want to go along with the data? That's fine. Give it some time. Time will lead to (1) online space that is more competitive, (2) lot more information about what works and doesn't work online, (3) users being informed, (4) users being more willing to pay for online services, (5) less startups without a plan for money from day 1 (due to competitiveness), (6) less accidental success (competitiveness), (7) less copycats (due to 1, 2, 4, 5, 6), and (8) separate area of competitiveness in ad selling / data selling. All of this will decrease the reliance on data as revenue, data as the base of a service, and ease of selling data, especially incomplete and incorrect data.
I don't have faith that the government will catch up with this stuff. I don't have faith that companies will voluntarily stop collecting data until users start paying. I do have faith in time.
That said, data will always exist and always be sold. That really is how the world works. :P