The Privacy Challenge in Online Prize Contests

Two big new prize contests just getting under way take a page from the innovative, exciting competition run by Netflix.

In a nail-biting finish in the fall of 2009, the movie rental service paid $1 million to a global team of data mavens, who just edged out another group, in most improving its online film recommendations. The Netflix contest was celebrated as a triumph for the company and as a catalyst for bringing new techniques to data analysis. But in 2010, Netflix was forced to cancel a planned second prize because of privacy concerns. Two researchers showed that the supposedly anonymous data from the first contest could be used to identify customers. That eventually brought an inquiry from the Federal Trade Commission and a lawsuit. So Netflix shelved its plans for a second contest.

Earlier this month, Overstock.com, an online retailer, announced it would sponsor a $1 million contest to the person or team that could most improve its product recommendations. And a few weeks earlier, the Heritage Provider Network, a medical group in California, released the data and the details for its $3 million contest. Its prize will go to the team that comes up a technique for most accurately predicting which patients will be admitted to hospitals in the next year. Both contests, like the Netflix competition, require contestants to come up with predictive algorithms, using anonymized personal data as the test bed. So how to avoid a Netflix-style privacy blowup in the new contests?