What are data brokers and why should you care?

October 2018

“Acxiom, Equifax, or CoreLogic – to most people these names don’t sound familiar at all. However, these companies know a lot about consumers. Without exaggeration, compared to friends and family, these companies at times know more about the person they have data for.”

Written by: Míša Zezulková October 18, 2018

When it comes to data usage and processing, some of the most visible companies are giants like Facebook or Google. These companies have created a huge market full of targetable customers, and hence marketers today will do almost anything to gain access to it. This trend is apparent when you take a look at the growth of internet advertising revenues, which last year exceeded the revenues of TV commercials for the first time in history. However, this is only the tip of the iceberg. Next to the well known tech giants, there is a whole plethora of companies which have created a lucrative business out of collecting, structuring, and selling personal data. We are talking about firms that are much less visible than Facebook and Google, but are even much more “Big Brother” in nature. It is time to get to know them.

Acxiom, Equifax, or CoreLogic – to most people these names don’t sound familiar at all. However, these companies know a lot about consumers. Without exaggeration, compared to friends and family, these companies at times know more about the person they have data for. They are so called “data brokers”, companies that collect personal data, structure it, and subsequently sell it to companies for targeted advertising. Although some of these companies were established already in the 19th century, data brokers have been experiencing a boom in the last couple of years thanks to innovations in computational performance and artificial intelligence. With revenues in the billions of USD one can only imagine how much the data they are collecting is worth, and according to predictions, this growth will continue for at least 10 more years.

The modus operandi of these companies is simple. Data brokers gather as much personal data as possible from hundreds of millions or even billions of users. They either buy data from retailers or they gather it themselves (do you remember all those entertaining quizzes on social networks you have recently taken?). They can also exchange this data among one another. According to a specialist from the business who wished to remain anonymous: “It is common that each company manages a different kind of data so it makes perfect sense to barter it.” No matter what method they choose for data collection, it always leads to the accumulation of huge databases. A few years ago, when the American Federal Trade Committee (FTC) mapped this sector, it came out that data brokers were storing up to three thousand different attributes on individual consumers.

What happens with the collected data varies from company to company. For example, Experian uses the data to calculate credit risks for customer loans. Such results are highly interesting for financial companies because they enable them to set up more suitable loan conditions for their clients. Equifax also sells the results directly to consumers themselves who are consequently able to review whether an interest rate offered to them has been fairly calculated. Similarly, the company Corelogic specializes in analytics and risk assessment in the real estate market.

The situation in Europe is slightly different from the US thanks to the implementation of GDPR (General Data Protection Regulation). Owing to this regulation, the levels of personal data protection are higher, making data brokers interested mainly in complex trends rather than individual consumer data. Analysis of collective behaviour enables them to estimate future development of customer trends, which is highly valuable to certain companies.

Data brokers in areas that are not so strictly regulated use the collected data mostly for marketing purposes. Such is the case for the company DataLogic, which sells to its clients databases of users containing predefined characteristics based on shopping history and other identifiers such as age, sex, education, income, or one of the 3000 other data points.

Gaining access to so much data doesn’t always deliver desired results. Issues arise when companies operate with distorted or low-quality personal data.  It is not uncommon for companies to possess a distorted digital footprint of a consumer. To create a false record in their databases, it can be enough to run a few searches on an illness that your colleague or relative suffers from. Via such a search, the data broker might come to the conclusion that the person behind the computer is ill. This does not apply to illnesses only. The algorithms of data brokers are very advanced, yet many times the digital footprint of your life does not reflect the reality.

How could such distortions be prevented? Easy, consumers could sell their data to brokers themselves. This would be a win win situation. They would get paid for sharing access to anonymized personal data, have a higher control over what data is being shared, and receive offers for products and services more suited to their preferences. For data brokers this would be a beneficial way of data gathering. They would receive exactly the type of data they need in much higher quality. At the end of the day, this may be the only way for data brokers to acquire personal data as more companies decide to cut their ties to them due to public scrutiny. Such would be a favorable solution, especially after Facebook announced that following the Cambridge Analytica scandal, it will no longer proceed with selling information about their own users to data brokers.

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