Pandora Filing Suggests Federal Privacy Probe

Tue, Apr 5, 2011 at 10:27 am

    A grand jury sought information from Pandora Media Inc. about how the company’s mobile application uses personal data, part of an apparent federal investigation into smart-phone privacy.

    The Oakland Internet radio company disclosed the request Monday in a filing with the Securities and Exchange Commission made in advance of Pandora’s planned initial public offering.

    “In early 2011, we were served with a subpoena to produce documents in connection with a federal grand jury, which we believe was convened to investigate the information sharing processes of certain popular applications that run on the Apple and Android mobile platforms,” the company said.

    It added that it is not a specific target of the investigation and that similar subpoenas were probably issued “on an industrywide basis” to other developers of smart-phone apps.

    Data on phones

    The apparent probe comes amid increasing scrutiny over what data is on your phone. In December, the Wall Street Journal reported that apps regularly collect and distribute users’ phone numbers, locations, unique ID numbers and even the users’ real names. It found that Pandora’s iPhone app sent location and demographic data about its users to eight trackers, mostly for advertising purposes.

    The practice is widespread among apps that, like Pandora, rely on advertising as their primary source of income.

    Pandora declined further comment.

    Privacy advocates welcomed the idea of a grand jury probe, saying consumers often had little information about how the apps they downloaded were sharing data collected from their mobile devices.

    “I think of them as spy phones, not smart phones,” said John M. Simpson, director of Consumer Watchdog’s privacy project.

    Simpson said the dearth of rules and regulations on how phones may share data puts consumers at risk.

    “There’s very little real privacy legislation, but I think there’s a growing awareness of the need for it,” he said. “I think that the (government’s) focus has been on the Internet. But increasingly people are becoming aware of the fact that the mobile world is the wild, wild West. And there’s going to need to be regulation.”

    Security software

    In the meantime, confusion over data sharing has created a market for security firms. San Francisco’s Lookout Mobile Security, which offers free and paid security software for Google’s Android operating system, offers a “privacy adviser” service that shows users which data their applications can access.

    “Even just knowing what happens on your phone eliminates a lot of uncertainty,” said Kevin Mahaffey, Lookout’s co-founder and chief technical officer.

    There are signs that developers may be becoming more cautious about accessing some user data. A Lookout report in February found a decline in the proportion of apps requesting access to users’ location and contacts – a suggestion that more developers are taking privacy concerns seriously, Mahaffey said.

    But eliminating access to phone data also threatens developers’ livelihood. Pandora said as much in its amended SEC filing, where it warned that new regulations could affect the quality of its service. Pandora first filed its IPO plans with the SEC in February.

    “Restrictions on our ability to collect, access and harness listener data, or to use or disclose listener data or any profiles that we develop using such data, would in turn limit our ability to stream personalized music content to our listeners and offer targeted advertising opportunities to our advertising customers, each of which are critical to the success of our business,” the company said.

    E-mail Casey Newton at [email protected].

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