Yes, you are a data slave. What does that mean? It’s pretty simple: your assets are out there making money but you are not getting any of it. Like your physical body, your car, your garden, your data is an asset that you fully own. It should be working for you, not for others.
Technology has always moved faster than the legislation, and this time it has created an entire industry based on a big fat lie. You think that products like Facebook and Google are awesome and free? Think twice, because you are paying a heavy price for them. Why do you think the tech companies have a combined market value worth trillions? Not just Google and Facebook are doing it, the same goes for Amazon, your local ecommerce site or your favorite news portal. All of them are collecting data about you without your knowledge. They also want you to believe that this data is worth pennies when it is actually worth billions of dollars.
Your can use almost any asset you own and make it productive for your own good. Think about renting your room out on Airbnb. Think about becoming an Uber driver with your own car or just use your body and mind for a job, like all of us do. With data, it is different. It is taken from you and monetized, but you won’t see a dime. You are a data slave and there is little you can do about it, at least for the time being.
The value of your data
The Boston Consulting Group estimates your data to be worth EUR 700 per year today and EUR 2’000 or more by 2020. Estimating the worth of your data is not easy – even for those who are currently buying it. A piece of data has a specific price at a specific moment under the given circumstances. It is auctioned off each time it is sold. The factors driving the price of your data include the use case for the data, the combination with other data points, the estimated accuracy and many other factors. Think about it in a real life context – you are buying a car and you have made a narrow selection of brands and models. You are going to spend EUR 30k in the next 4 weeks and your final decision depends on the few experiences you will make with the different producers from now until you buy the car. From the moment you started searching each carmaker will probably spend EUR 1’000 on communication efforts until you make up your mind. EUR 3’000 is the margin that is likely going to be spent so you set your preferences right. If any of them knew you are seriously considering buying from them, you’d have a car for test drive at your doorstep immediately.
If you think of the bigger picture imagine how many thousands of EUR you have spent on various products over the past 12 months. For those manufacturers your data is worth at least 10% of your total spend. They need that margin to find you and reach you. With the right data it has never been easier. The higher the margin the more they would spend to make the sale.
Let’s look at industry figures.
Global internet ad spending passed $140bn in 2014 and will reach $210bn by 2018.
Top 5 valuable internet companies have a combined market value of $600bn.
The data broker industry alone has made revenues of $200bn in 2014.
Each year those numbers are growing in double digit %.
What kind of data is collected
The largest data broker in the world, http://www.acxiom.com/, has more than average 3’000 data points for over 700m consumers. Yes, that includes you too. In other words, Axciom knows more about you than you do or your mum does or anybody does.
A tiny fraction of that data is collected actively e.g. when Facebook asks you about your name, your age, your marital status, where you live etc.. Everything else happens passively; every single move you make on the internet including pictures your upload, things you “like”, products you click, profiles you look at and buy, and more. It is very likely that somewhere your credit card spending data is being tracked too. I mean, have you read the T&C every time you entered your credit card information?
If you’re an American or UK citizen, the government surveillance goes even further. The NSA and the GCHQ (the British equivalent) tap your phone, your TV and internet cable, everything. They have full records on any move you make. When Edward Snowden came out with the NSA scandal, it showed that Verizon is delivering the NSA 123 million pieces of data each day and that’s just one supplier.
I highly recommend you to watch the HBO documentary Citizenfour http://www.imdb.com/title/tt4044364/.
How the industry works
It’s quite hard to understand how data tracking works as it is very technical. You can imagine that any move you make online can be measured and tracked. I use Google Analytics, so Google knows you’re reading this. Sorry for that! Hope you can still use Gmail after this. Just kidding.
Now companies like Google or Facebook don’t just track on their own websites. They have vast networks of websites in the web in which they are “sitting” behind the curtain and are able to watch every move you do. Try http://www.avg.com/ww-en/privacyfix to find out who is looking at you on any website.
Your data is then most of the time used for advertising through the companies’ own platform (Google Ads, Facebook sponsored posts) and at the same time is it sold to other data buyers such as DSPs (I will come to that) and data brokers, who buy data from everywhere, package it and sell it for a higher price to a variety of customers, including almost all Fortune 500 companies.
DSPs are the demand sided platforms. They help advertisers buy advertising space from publishers. At the same time they help advertisers to buy data to better target their ads. I’m giving an uber-simplified version of the field. Below graphic gives you the full context.
Brokers have been in the focus of the debate for a while as they probably know most about us from all the data companies. You can find a comprehensive report on brokers via http://1.usa.gov/1AwePQE.
Further, data is never purchased for storage like a physical product. Given its timely nature, data is bought and used for one-time advertising transactions. Each time you see an online ad, the company spend a little bit of money on data about you.
So how is your data finally being used? Think of Nike launching a new soccer shoe campaign. Of course they want to talk to all the active soccer players out there. They need the data to identify their relevant market. Facebook might have a few and Nike can advertise to those straight via Facebook. But maybe Nike doesn’t want to be on Facebook, they want their ad to be shown on a specific sports news website. To use the data from Facebook on that site they need cookies and other web referencing systems to find the relevant targets again on the publisher’s side (the sports website is the publisher here).
Why it hurts us all
A lot of people actually don’t oppose the fact that data is used to personalize advertising. Why not see things that are relevant for you if you have to look at advertising anyway!? I can understand that so far. But the thing is, the problem goes a bit further than that.
The real problem lies in the way the industry is built from ground up. Facebook doesn’t need to earn billions of dollars to create a nice way to present your profile and exchange information via posts and messaging. Facebook is only a cool social platform from your perspective. The real Facebook, where all it’s power and money comes from, is the advertising powerhouse you never get to see. Behind the nice and fun facade, it is not the same company. It has collected the most valuable data about you behind your back while keeping you in its good graces. Hence Facebook is walking a fine line, juggling users expectations and those of its shareholders. Walking that line is very costly.
Given that all data is collected behind the curtain, the data quality isn’t that great. It’s full of assumptions and leaps of logic, but still the data isn’t cheap to get. Advertisers buy this dubious data (it’s better than nothing), but many ads are still very badly targeted and lead to bad business results. This on the other hands leads to higher sales and advertising margins required to reach enough consumers. In the end the consumer pays the price two times, once when our privacy is breached and once when we pay premiums on products to finance their related advertising costs.
Further problems include the inaccuracy of the data they have about you when they share it with the HR departments of the world. You can be a proper businessman or woman in real life but a crack dealer on paper, I’m not kidding. The data traders don’t care if you actually have done things that they assume you did. They only care for how much they can sell their conclusions on you in the long run. Sources of false data get bad ratings and will yield less revenue. But many mistakes never show until they are meaningful in the given context, e.g. your job interview. HR departments and government are buying roughly 10% of the total data supplied by data brokers. If you’re ever rejected from job interview that you should easily score, consider giving Axciom a call.
There are many voices calling for a new solution and a paradigm shift in the dirty personal data industry.
Regulation is picking up on the topic and multiple governments have introduced measures to make the situation at least a bit more sound in front of the law. http://ec.europa.eu/justice/data-protection/
These new laws are the reason for cookie-checkboxes being used everywhere. No website really gives you an option to say “no I don’t agree”, so the problem is far from being solved.
The only person who can restore order is you. If it is your data and if it is you they are interested in why don’t you offer yourself out there and take the cash that is being offered for your data? What I’m saying may sound far-fetched but I’m not the only one proposing it and it is not completely unrealistic. In May 2012 Frederico Zannier sold his full data stack he collected on himself for $2’733 on Kickstarter! But Frederico was a skilled engineer and that is the reason he was able to collect and market his data. I think there should be a simple tool for all of us which helps us collect, control and market our data. If all of us would sell a fraction of our data to feed the poor in this world, nobody would be hungry anymore (support https://thegooddata.org/).
Hope you found this introduction into the personal data topic interesting. Feel free to drop me a comment on what you think about the current situation and how you think it could be resolved. If you’re interested in building a startup around this topic, you are more than welcome to contact me.