Silent Circle

The race to destroy your data

June 14, 2013: 10:24 AM ET

Companies like Silent Circle, which promises to secure or get rid of consumers' private information, have seen a surge in the wake of government spying reports.

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FORTUNE -- Silent Circle, an app that allows users to place encrypted phone calls, makes money on paranoia. Paranoia like, say, the fear that the government might build a massive surveillance operation in cooperation with major tech companies and then keep it secret from the public for years.

So naturally, after news broke that the government really was gathering large amounts of data on Americans' phone calls and e-mails, Silent Circle found itself in a sweet spot. The company says reports of the National Security Agency's data-gathering activities drove a huge increase in sales -- up 480% in the last seven days.

Silent Circle isn't the only company that's making money off increased privacy concerns. Pre-NSA news, apps like Snapchat, and to a lesser extent Facebook's (FB) Poke, had already seen big growth from users who want to cover their tracks online. For the more serious consumer, there's Wickr, which allows users to create self-destructing messages and photos. The company saw downloads increase 156% in North America and 116% internationally since the story broke, said CEO Nico Sell. "If the NSA pushes this, then it will create a whole new market for encryption software on phones," security researcher Mark Wuergler, senior security researcher of Immunity said in an interview with CNN Money. "This is the best marketing these app developers could have hoped for."

Morningstar (MORN) analyst Grady Burkett cautions that consumers' interest may be short-lived, though. "I don't think this is going to create some kind of big launch pad," Burkett said. "Yeah, you might get an uptick in downloads and create some money in the near term, but I wouldn't think in the long-term this is going to create a huge spike in revenue." Of course, that will depend on how quickly the NSA story fades from the spotlight. If new tales of government wiretapping and commercial data-gathering continue to make headlines, it seems unlikely security worries will ebb in the near future.

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At Silent Circle, about 60 employees engineer products that allow users to make virtually untraceable calls over an encrypted network, as well as send encrypted text messages and e-mails. With a feature called Burn Notice, users can also set a specific amount of time until a file self-destructs. Though that function calls Snapchat to mind, the company says there's no comparison. Silent Circle, with its roots in the military, has no ambition at becoming a social network. It doesn't know your name, won't store your details, and derives much of its usage from services like videoconference and transferring large files.

About 70% of Silent Circle's users are business or government customers. That includes 15 Fortune 50 companies, plus eight intelligence agencies throughout the world. It has also partnered with luxury phone maker Vertu to put out a $10,000 hyper-secure phone.

In the wake of the NSA surveillance news, Silent Circle introduced a new pricing scheme to capitalize on the increased interest. It will now cost $120 per year to use the full Silent Suite, which includes Silent Phone, Silent Text, Silent Eyes, and Silent Mail. CEO Mike Janke, a retired Navy SEAL commando, said the new pricing is in response to "overwhelming demand."

But even before the story broke, Silent Circle was doing pretty well. The company launched in October of last year, and made some waves in the press. Following a more complete product launch in February, Janke says sales growth was averaging 100% month-over-month, even before the NSA news. In May, Janke told The Washington Post, "we're hiring as fast as we can." He predicts the company will have about 3 million users by year-end.

"People are saying, 'Oh my God, I'm so pissed off that the NSA was looking at my stuff,' and rightfully so," Janke says. But he also notes that people are increasingly worried about commercial data gathering, plus surveillance from other government agencies, which may be even more secretive or invasive than the NSA. "There are 71 other nation states -- think Russia, China, Italy, France -- out there with NSA-type organizations of their own. They can get access to this data, too."

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Of course, there's a dark side to services like Silent Circle. Yes, they may be good news for journalists and political dissidents, but they're also good news for people planning to commit crimes or blow up buildings. Janke recognizes that despite the high interest from law enforcement officials (it is the only commercial communications product approved by U.S. Special Operations Command), he may eventually run into friction with the government. Furthermore, Silent Circle isn't the end-all solution to every privacy woe. The highest-level encryption service might prevent data harvesting, says Bogdan Botezatu, senior analyst at security firm BitDefender, but offers little protection from targeted government snooping. Silent Circle also warns that GPS data on calls may still be tracked by a user's cell phone service provider, and that it does not protect against malware.

But if Silent Circle isn't enough, there are plenty of other programs and apps to choose from. Tor and Orweb enable anonymous browsing. And there's a seemingly countless number of other devices and applications that scramble, hide or delete user data. Plenty more are likely to follow.

In comparison to these products touting themselves as military-grade, iPhone phenom Snapchat looks both more appealing to the average customer, and comparably light on security. But the forces that drive users to the programs are similar -- a deep angst over the post-privacy era. Thanks to the NSA, and the troves of now data owned by the likes of Google (GOOG) and Facebook, fear of being watched isn't just for kooks anymore. Paranoia has become mainstream -- and it could be big business.

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