This New App Wants to Pay You to Share Your Data For Advertising

The idea of giving consumers a cut of whatever brands might pay to reach them isn’t new, but it has been reinvigorated as outside companies have found it harder to harvest and share so-called third-party data. The digital ad industry has been seeking new sources of the consumer data that guides online marketing efforts as traditional tracking techniques have come under pressure. A new Apple policy last year requires apps to ask permission to track users, for example, permission that many people have declined to give. 

Caden, which has been testing with a limited group of users, plans to begin a public beta test of 10,000 users early next year. The company last month closed a $6 million round of funding led by seed-stage venture-capital firm Streamlined Ventures and including Yahoo co-founder Jerry Yang through his venture firm AME Cloud Ventures.

“The team is uniquely focused on trying to solve one of the dilemmas of the internet: the exchange of consumer data for ‘free access’ to services, apps, and websites,” Mr. Yang said. Consumers have typically had little or no control over how their data is collected and who it is sold to, he said.   

Caden will give consumers a range of choices about sharing their data, including how it is shared and for what purpose, it said. 

One option in the public beta test will anonymize and pool the data before sharing it with outside parties in exchange for $5 to $20 a month, according to Caden founder and Chief Executive John Roa. The amount of compensation will be determined by a “data score” reflecting factors such as whether consumers answer demographic survey questions and which apps and services’ data consumers are sharing. 

Consumers will eventually be given the option to share more specific information for more tailored advertising. A marketer could then form audience segments and tailor their ad targeting and messaging to those groups. For instance, a user could consent to sharing his ride-share history so advertisers could create segments of people who ride a certain amount. That would eventually pay consumers up to $50 a month, Caden said.

A third option would let advertisers take a direct action based on the data that Caden understands about a specific user. If a consumer were part of a department store’s loyalty program, for example, the store might reward her for sharing her individual Amazon shopping history and use it to provide more personalized offers. That could generate thousands of dollars a year for participating users, the company said. 

Caden also hopes that the data it can aggregate will be compelling for consumers. Users could search for restaurants they’ve eaten at in a certain city, for instance, or how much they spent in certain categories across different apps, executives said. 

“It’s like Spotify Wrapped for your whole life,” said Amarachi Miller, Caden’s head of product, referring to the streaming music service’s year-end distillation of each user’s listening.

Mr. Miller said two early groups that have shown interest in the app have included tech early adopters and couponers, a group of consumers that are savvy about rebates and deals, who hope to use the app as a passive income tool. 

But any app that’s successful in the space will need to win over all sorts of consumers and keep them coming back in order to give marketers a compelling amount of data, said Ullas Naik, founder and general partner at Streamlined Ventures, the lead on the new funding round.

“The consumer app is going to have to be incredible. Not only the user experience, but also the value that the consumer gets is going to have to be amazing,” Mr. Naik said. He said his firm has looked at many companies attempting this in the past, but believes Caden is furthest along in putting it all together.

Caden is trying to crack into a nascent business with plenty of competitors, said Forrester Research Inc. analyst Stephanie Liu. Other companies in the space include CitizenMe Ltd., which lets consumers gather their own data and exchange it for money or rewards, according to its website. 

Success will require not only wide adoption by consumers and advertisers but also trust from consumers, Ms. Liu said. She said if consumers’ data is used in ways they don’t expect, they could be turned off and abandon such platforms. She said companies must do what they can to retain consumer trust and ensure advertisers don’t breach that trust. 

Caden said it will initially sell only anonymized and aggregated data that doesn’t tie back to individuals. As it starts to let brands do more personal promotions for users, it said it will let users see which brands and partners it’s working with, and will let users control which brands can access their information. For instance, a consumer would be able to see that they’re represented as someone who streamed a horror film in the past 30 days. They’d also be able to limit or restrict advertisers by a category or by name. 

Caden’s plan to let consumers choose which brands they share with, and what kinds of information brands get, could be a differentiator, according to Ms. Liu.  Some other players that offer compensation for data have required consumers share their entire profile with all brands. 

But Ms. Liu also said she believes the space isn’t likely to see mainstream success until another privacy shift—Google’s plan to stop supporting third-party tracking in its Chrome browser—takes effect no sooner than 2024. Brands for now can still collect much of the information about consumers that these services are asking users to consent to share on their own, she said.

“I think these will be a series of niche solutions, something advertisers can experiment with and something consumers can experiment with, but I don’t see them taking off,” she said.

Write to Megan Graham at megan.graham@wsj.com