Data brokers make the National Security Agency surveillance programs look like a kid with a clipboard.
No, I am not paranoid about the rise of some Orwellian society or the other 1984 metaphors that privacy advocates are fond of trotting out. Although paranoia coupled with a suspicious nature is what makes for good reporters.
In the universe of big data and data analytics, the center of it all is the totally legitimate, highly proficient but somewhat shadowy world of the data broker.
In its simplest form, the data broker is an online tracking service, but this is not like a Dunnhumby or Nielsen survey. Some privacy advocates characterize the business as data demons—a latter day Fagan, a parasite that feeds on the flesh of others. Kind of makes the hair on the back of your neck stand up, doesn’t it?
The truth is that data brokers like Acxiom, Experian, Dun & Bradstreet, Corelogic, Datalogix and Intelius, represent a multi-billion dollar industry that gathers information from a variety of public and private sources. They know what products you buy, what you are likely to buy, what you would really like to buy, whether you have cancer, if you are cheating on your spouse at some sleazy motel by tracking your license plate or what color the upholstery is in your Lear jet.
The value of this kind of consumer data, often described as “the new oil,” is that they not only collect information but are data aggregators, combing through everything from sweepstakes entries, house purchases and even movie preferences.
Does this herald a new era in data mining? Or, should you keep these brokers at arm’s length for fear of violating a customers’ right to privacy.
The siren’s song of data brokers is pretty hard to resist, given not only the depth of the information but the cost. According to a recent analysis in the Financial Times, basic demographic and geographic data costs about 50 cents per 1,000 people. Car buyers are worth about $2.11 per 1,000 with TV viewing habits at $1.85 and movies $3.00 per thousand.
The highest cost is attached to home buyers and new parents, each priced at $85 per thousand, and 26 cents per person reportedly buys you lists of people with specific health conditions—still pretty inexpensive considering the purchasing power of those groups.
Even in the aggregate, this makes privacy advocates twitchy. This coupled with recent NSA revelations makes everyone a bit more nervous about delving into the lives of citizens—even though there is no such thing as a “right” to privacy. Even if there were, you lost it when you applied for your first credit card, driver’s license or checking account.
Nonetheless, recent publicity over government snooping will likely unleash a new round of privacy legislation in Congress. The latest is the “Apps Act,” which requires consumers to sign off on privacy policies before being able to use them. This moves the industry closer to the uber-strict European privacy laws. At the very least, it is another barrier between customers and the digital checkout. As we have seen, people will simply abandon their carts if the process becomes too cumbersome or invasive.
Where does that leave retailers? For the most part, just where they have always been. However, I hear disturbing rumblings about companies easing off the consumer data throttle for fear of being sued or, at the very least, incurring some negative press. You know what they say—where there is a will, there is a lawyer.
Data aggregation is not some Pandora’s box unleashing evil on the world and incoherent fear mongering should not dictate competitive strategies. That would be a giant step backward in combining the art of merchandising with science, not to mention retailers’ ability to really understand customers rather than viewing them as one monolithic group.
However, I do agree there should be greater transparency in data collection and distribution in order to protect consumers against unscrupulous use of the information.
To quote comic book icon Stan Lee or the French novelist Voltaire—depending on which data source you believe: “With great power comes great responsibility.”
Len Lewis, a regular Grocery Headquarters columnist, is a veteran industry journalist, commentator and editorial director of Lewis Communications. He is the author of The Trader Joe’s Adventure—Turning a Unique Approach to Business into a Retail and Cultural Phenomenon. He can be reached at firstname.lastname@example.org or at www.lenlewiscommunications.com.