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Inside the shadowy world of data brokers

Matt Kapko | March 28, 2014
Data brokers operate in the shadows of the Internet. Most consumers are unaware or unsure how to put restrictions of their activity. In fact, one U.S. senator called these companies and their practices 'the dark underside of American life.'

That data may include information like when someone comes home or leaves, the places or establishments they frequent and when and where they swipe their credit cards to make purchases.

"I think most people have no idea that it's being collected and sold and that it's personally identifiable about them, and that the information is basically a profile of them," Brill says. "Consumers don't know who the data brokers are. They don't know the names of these companies."

Caught in the Cross-Hairs of the FTC
By flying under the radar, data brokers have largely been able to keep consumers at bay. The sheer volume of them, which easily number in the thousands, confuses consumers and matters of privacy all the more.

"When you're collecting across billions of data points, regardless of its accuracy, there's going to be groups of individuals behaving the same way." — Adam Kleinberg, CEO of Traction

The largest of these companies — Acxiom, Datalogix, Epsilon and Experian — are bridging together data from the online and offline worlds and selling it to the likes of Facebook, Twitter and others to enhance their respective ad products. The general approach is to group and categorize consumers for marketers' online ad targeting efforts. Programmatic ads are then sold and targeted based on these profiles, which the industry insists are anonymous and not personally identifiable.

Regulators and legislators across the political spectrum are making it a top priority to investigate these data brokers and enact laws that could curtail their way of business. But as more troubling details about the operation and seemingly unrestricted reach of these data brokers come to the surface, it's unclear what can or will be done to rein in their most damning practices.

Daniel Kaufman, deputy director for the FTC's Bureau of Consumer Protection, says the agency is currently studying nine data brokers. "They collect an enormous amount of data and they are not consumer-facing," he said at last week's GigaOm Structure Data conference in New York City.

"How are they getting their data? How do they make sure it's accurate? Who are they sharing it with?" Kaufman says. The FTC takes law-enforcement actions, and it doesn't create regulations. However, he adds that "the commission has been supportive of legislation that would support or improve the transparency of data brokers."

Getting to Know You
The how, when and where of data collection may be perceived by many as nefarious, but the real debate begins over why. "Quite simply, in the digital age, data-driven marketing has become the fuel on which America's free market engine runs," the Digital Marketing Association wrote to members of Congress in 2012. That generally sums up the view of almost marketer today, and the sentiment is even more on point and agreed upon in the world of real-time marketing on social media.


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