Data Brokers

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Contents

Definition

What are Data Brokers?

Data Brokers [1]

Have you ever noticed ads while you surfed the internet that seemed targeted to you? Ads that seem interestingly common to what you have previously surfed the internet for? These ads are actually developed and targeted towards consumers through data brokers. Data brokers or Information brokers are companies that collect personal information including names, addresses, incomes, online activity about consumers from a variety of public and nonpublic sources and resell the information to other companies. [2] These pieces of information are valuable for the company because it allows them to make better business decisions based on information that indicates consumer preferences and attributes that allow a company to target certain groups or markets. All your personal information that you share online through Facebook, Twitter, Instagram or other social media sites are all used as sources of information to sell to other companies for generating profit. [3].


After collecting the information from consumers, the brokers combine and analyze the data about consumers to make inferences about them. This includes sensitive inferences about ethnicity, income, religion, political learnings, and age. [4] All these pieces of information are used to enhance a business's ability to make more profitable decisions or to influence consumers in making a decision. The information collected by these companies are a powerful tool for others to access and can lead to positive or negative outcomes. Data brokerage was initially developed through the internet which led to companies being able to collect, analyze, store and transfer data. This then gave rise to the data brokerage industry. [5]

Different Applications

In this modern age, data has become one of the most influential currencies in the world. This is largely due to significant growth in technology and infrastructure over the past few decades. As a result, businesses are now increasingly focusing on acquiring, storing, and trading data about consumers in order to understand their market better. Data brokers play a vital role for businesses since they make meaning out of the data that is collected about consumers.

Types of Data Brokers

Similar to many other jobs with one title but different roles depending on the industry and experience level – likewise there are different types of data brokers. The Federal Trade Commission (FTC) divides Data Brokers into three broad categories based upon the type of product that they sell: (1) Risk Mitigation Products, (2) People Search Products, and (3) Marketing Products. [6]

Risk Mitigation Products

There two primary sub-categories of risk mitigation are identity verification, and fraud detection. In identity verification, data brokers assist organizations including government agencies and banks in checking the identity of an individual. This search will allow banks and other companies using a data broker to ensure that there is not a high level of risk associated with conducting business with the individual. There other sub-category, fraud detection, assists various clients such as government agencies in verifying the reliability or truthfulness of information a person submits to them.

People Search Products

Data brokers in this field collect data on personal information about individuals in order to find methods for contacting and/or locating a person. These types of data brokers receive this information from government and public records. People search products is most susceptible to identity risk as anyone can obtain information and consumers do not have any legal rights to prevent data brokers from publishing their personal information. Products like ancestory.com provide personal information about people's distance relatives and family trees. Data Brokers are able to collect this information from government and public records. [7]

Ancestry [8]

Marketing Products

In this field, data brokers collect data to understand the behaviour of target consumers. This will then help them with creating personalized ads and marketing plans.

Data brokers that sell marketing products enable their clients to create tailored marketing messages to consumers. This can be through the internet, cable devices and marketing analytics which are used to predict consumer behaviour. The Federal Trade Commission (FTC) has grouped all of the following marketing products into the direct marketing category, which includes direct mail, telemarketing, email marketing, online marketing (marketing to consumers via the internet, on mobile devices, and through cable and satellite television), and marketing analytics (which attempts to predict consumers’ likely behaviour.[9]

Data brokers claim that “the benefits of using data brokers is huge for companies that wish to understand their audience, advertise to specific audiences at specific times, customize communications, gain insight for marketing campaigns both online and off, and monetize data by connecting it across product streams and by validating data on hand”.[10]

Positives and Negatives

Positives aspects of using a Data Broker

Data brokers must be successful in providing accurate inferences from the data collected for their partner businesses to grow and prosper while using information brokerage. If successful, businesses will have a better understanding of the consumers in their target markets. As a result, this will allow businesses to provide higher quality products and services; thus offering greater overall value. [11]

Once businesses are able to understand their target market better, they will be able to provide better quality products and services, which will lead to stronger customer loyalty and satisfaction. This loyalty will rise from the increase in customer trust and brand reputation, which may result in an increase to sales for the business. Other beneficial factors that businesses may receive are the ability to generate quality leads that improve sales, or, perform background and credit checks for companies in the industries like banking and policing. [12]

Data brokers are helping society by preventing fraudulent activities from taking place. They also assist with improving product offerings of a company by giving the company relevant information to make better business decisions. Likewise, companies are able to deliver tailored advertisements to consumers as a result of accurate inferences.

Negatives aspects of using a Data Broker

The idea of individuals such as data brokers and other companies potentially knowing more about you than you may know about yourself is a frightening feeling. With that being said, there is a lot of uncertainty with the scale and scope of the data being collected by data brokers. [13] Data brokers mine the data to create profiles of consumers for marketing purposes and we may not even know it is happening. The reality is that as data profiles draw adverse inferences about consumers, this may potentially lead to discrimination against consumers based on the data presented. For instance, from the information collected, companies may decide to charge a consumer more for goods and services based on their wealth and profile.[14]

Based on a CBS News article, a journalist investigates the multibillion-dollar industry that collects, analyzes and sells the personal information of millions of Americans with virtually no oversight. [15] There is emphasis on the fact that companies collect data without us knowing through having multiple page terms and conditions which must be accepted before proceeding. This is where individuals skip through reading the fine print and click "accept" unknowingly. Companies then have your permission to collect information about you. Situations such as these make data brokers a negative and scary industry.

Value Chain

Definition

A value chain is a high level model used to describe the processes by which businesses receive raw materials (inputs), add value to those raw materials to create a finalized product (outputs), and then sell it back to a customer [16] . For data brokers, we decided to focus in on a company and analyze its value chain. We chose Axciom, a data driven company that provides the world’s best marketing companies with a foundation of data. The company collects data from consumers, analyzes it, then packages and sells it to companies for use. It is categorized into support activities and primary activities. The support activities support the primary activities, which relate directly to the physical creation, sale, maintenance and support of a product or service. [17]

Example: Axciom

Axciom Logo [18]

Support Activities

Firm Infrastructure

Axciom is a marketing and services company operating in South America, Europe, Asia and the United States. The company has administrative support and is given direction based on its corporate governance structure. The company has a Board of Directors, and a team of senior management that take on the day to day operations. The Board is split into Board committees allowing for more specific work around the company including financials, governance, executive to do the Boards work. The company also operates under its corporate governance principles and is public, allowing non-employees to purchase stock options in Acxiom. [19]

Human Resource Management

The Board of Directors appoints the executive officers of the company and the executives then hire the rest of the employees of the company. The company operates in 10 countries over 21 cities and has a distinctive culture. Axciom hires interns and new grads with opportunities to get mentored and solve problems within the world. The company also provides lucrative retirement savings plans, has volunteer paid time off to encourage philanthropy, onsite gym programs, employee stock options, discounts and resources to support their families and career paths. The employees are the heart of the company. [20]

Technology Development

The company provides customers with data to help them plan for campaigns or engage with their target consumers with relevant offerings. The company offers different services to ensure that it is kept up to date with technology trends. It has services that unify marketing data through a privacy-complaint link called Abilitec. It has another service called Audience Cloud that provides access to Acxiom data through self-service tools that support modeling, planning and distribution of data. The company ensures it hosts these multiple services so that other companies are able to request services from Acxiom that tailor to their companies rather than having an off-the shelf data service package. [21]

Procurement

Axciom collects data from three different sources which is then rented or sold to companies for their marketing use. The sources include public records, consumer surveys and summary reports. The company collects these types of information through licenses, consumer surveys, catalogs, retail purchases,etc. The information is transformed to help Axciom provide better service to its businesses. [22]

Primary Activities

Inbound Logistics

Axciom collects the data from the three sources including public records, consumer surveys and summary reports then processes it internally into packages. The data is then categorized and placed into different segments within the company based on its relevance. Through the internalization of the data, Axciom prepares it for its next step in the primary activities. [23]

Operations

The data is then housed into different services that it eventually sells to companies including data packages, audience monetization plans, global data, identity verification, personicx, etc. These different services tailor to the needs of a company, whether they need to enable to access to private consumer data, reduce risk of fraud, learn about consumer behavior, etc. [24]

Outbound Logistics

Axciom delivers its services to customers through its online platform and sells the information as a business. The company looks to maximize its efficiency of distributing its data by being online, this minimizes costs that other companies incur due to transport and storage costs. It is one of the largest information providers in the world. The information is then collected by consumers, packaged then sold to the consumer through multiple avenues. [25]

Sales and Marketing

Axciom campaigns on delivering services in areas of data strategy, analytics, integration and actionable marketing solutions. The company emphasizes how it can create a view of a consumer and help a company focus its marketing campaigns. The company provides an abundance of online services that suit to multiple consumer needs. Its online platform provides an overview of the different services available. The company also has sales representatives that are able to answer any questions or inquiries about the company.

[26]

Service

The company constantly collects new data from its three sources ensuring that it protects the customers and their brands. They ensure data stewardship capabilities to assist in putting protections in place. The data is secure and SOC2 certified and meet regional requirements for handling consumer data. The company also provides experts in data governance and privacy to validate sources, policies and designs. The company also follows a strict set of ethical codes to hold its members accountable. [27]


Financials

The data brokerage industry has grown significantly in recent years and it will continue to grow as more and more data is generated each year. With the Information of Technology (IoT) set to take off, the amount of data being produced is going to continue to grow at exponential rates. However, with the influx of all this new data, managing, storing, and extracting value from it will continue to become even more complex. Data brokers will continue to perform activities with this data and find new ways to create value and generate revenue.

The image below shows how much information is worth to Data Brokers and Consumers.


Information Worth [28]

Data brokerage is a lucrative industry that is worth $200 billion dollars. The members in the industry were able to generate billions from the sale of data to companies who are interested in making better business decisions. On the consumer side, people can sell their information to generate income through surveys or data bases.


Value Creation

Data brokers will offer different variations of value to their consumers. All data brokers need to collect data and most data brokers then clean and store the data by running it through proprietary algorithms. The data is stored and then its access is sold to a data broker’s customer, often to help them make a better informed business decision [29].

Acxiom, the largest data brokerage by revenue, was the first to collect offline data. The following video is an interview with Acxiom’s CEO and he describes what Acxiom does and how they provide value to their clients.

Axciom


An interesting point from the video is that the CEO never answered the question “Do you know the numbers to my bank account". This shows that Axciom like many other data brokers may not want the public to know the sensitive information that companies are able to collect and store for business purposes.[1]

Offline Data Collection

Data brokers also collect offline data about consumers. This means even without social media, they can collect sensitive information from you. This data is collected in a number of ways. Often, it is by partnering with other companies who store your personal data. An example of this is when a retail store asks for your phone number when you make a purchase. When you provide your phone number, the time and purchased items is also collected; thus the retailer is able to collect your personal and preferred information.They can then sell this data to a broker who will associate the phone number to your profile, and the broker will also gain more insights on your purchasing behaviors.

Another example of the collection of offline date is Google. They partner with credit card companies to have access to 70% of American’s purchase history [2]. For every line on your credit card record, Google sees what you have bought, and can directly associate the online profile they have of you with your offline purchases. They use this information to show the success their ads have on you by demonstrating that the ads they show to you influence your purchasing tendencies. [3].

Axciom/Heathrow Example

To give an example of how data brokers make money, we look at how Acxiom worked with Heathrow airport to improve their customer loyalty program and increase revenue.

Acxiom has data on millions of individuals. Heathrow’s loyalty program collects information on the people who pass through their airport and make purchases. Heathrow gave Acxiom access to its CRM database, and Acxiom used its identity resolution software to combine this data. Acxiom’s data included age, income, employment, demographics, and lifestyle. This then gave Heathrow a more complete view of who passes through their airport. It lead to impressive results including a 22% increase in their loyalty program’s spending. Below is the case of Heathrow compiled by Axciom. [4]

Heathrow Use Case [5]

Privacy/Security

Analyzing the potential concerns related to organizations such as data brokers that trade information, the risk associated in safeguarding large amounts of personal information and associated implications of data breach is relevant today as storing data has become easier and cheaper. Data brokers are able to easily find information on your demographic, identity, court and public records and even your ability to afford products. The way data brokers find this information is from government and public records, self reported information from the consumer such as from contests and surveys, social media, or even from other data brokers.

What kind of information can Data Brokers collect?

Data Brokers Privacy Issues

[1] An interesting point from this video is that Data Brokers are able to gather a large amount of information about people and how privacy issues continue to get revised throughout the world. But on the other hard, Data Brokers are able to aid with fraud prevention to make sure that authorized payments are made from the correct person. They can easily obtain information such as:

Identifying Data:
• Name
• Previously Used Names
• Address
• Address History
• Longitude and Latitude
• Phone Numbers
• Email Address

Sensitive Identifying Data:
• Social Security Number
• Driver’s License Number
• Birth Date
• Birth Dates of Each Child in Household
• Birth Date of Family Members in Household

Demographic Data:
• Age
• Height
• Weight
• Gender
• Race & Ethnicity
• Country of Origin

Court and Public Record Data:
• Bankruptcies filed
• Criminal Offenses and Convictions

Social Media and Technology Data:
• Electronics Purchases
• Friend Connections
• Internet Connection Type
• Internet Provider
• Ability to Afford Products
• Credit Card User
• Presence of Gold or Platinum Card

Privacy advocates fear that Data Brokers may use personal information (particularly demographic information) to discriminate against certain consumers. For example, the FTC warns that company’s can target vulnerable groups with subprime loans.[2]

Facebook purchases your offline history from Data Brokers

Facebook is buying your offline activity from a “few different sources” to find out information such as which restaurants you visit, your income, and even the number of credit cards in your wallet. In 2013, reporter Julia Angwin tried to opt out of Facebook's suggestions so that data brokers were unable to obtain her information. Out of the 92 brokers that accepted to opt out, 65 of them required her to send in a form of ID, and in the end she could not remove her data from most of the providers. Facebook primarily uses data brokers for “Marketing Products” based from what we learned earlier to predict consumer behavior and how they can generate Facebook money.[3]

Laws that regulate Data Brokers

According to the FTC, there are no current federal laws requiring data brokers to maintain the privacy of consumer data unless they use that data for credit, employment, insurance, housing, or other similar purposes. Users generally have no federal right to know what information data brokers have compiled about them for marketing purposes. No federal law provides consumers with the right to correct inaccuracies in the data or assumptions made by data brokers. [4]

Consumer issues on Privacy

There is no federal statute that provides consumers with the right to learn what information data brokers have compiled about them. Similarly, consumers do not have a right to “opt out”, that is, to prevent data brokers from collecting, sharing, or publishing their personal information. Although there are company’s like Facebook who has the option to opt out, doing so is tedious and often information is still available to data brokers. Consumers also do not have the right to require data brokers to correct or delete inaccurate, incomplete, or unverifiable information.

The Future of Privacy

Privacy concerns [5]

To help limit the amount of information data brokers can get from consumers, we can:

1) Delete cookies: Cookies let websites collect information about what else you do online. Most browsers have privacy settings that let you block third-party cookies. However, companies are still able to track that you are switching from cookies to a new kind of targeting called fingerprinting, which is much harder to avoid.

2) Log out of social media sites while you browse the web: Use different browsers for different online searches. This will limit how much information any one site can collect about your web activity.

3) Change your smartphone’s privacy settings: You can change the privacy settings on your iPhone or Android device to limit ad tracking.

4) Skip store loyalty cards: Although you may be able to receive points and discounts, this is a primary way for data brokers to get a lot of sensitive information including household income, etc.

5) Opt out of Data Broker Collection (when possible): The FTC concluded that to date, "consumer opt-out requests may not be completely effective." But there are company’s that provide the opt-out option which may not completely limit how much information is stored about you, but will help reduce the amount of information brokers can collect. [6]

Ethics and Regulations

Regulations comparing Canada vs. America

Canada:
There is a distinct difference in the regulatory framework in the United States and in Canada. Unlike in the United States where only certain types of organizations or activities are regulated by specific data protection legislation, the Personal Information Protection and Electronics Document Act (PIPEDA) applies to all organizations that collect, use and disclose personal information in the course of commercial activity, except in provinces with substantially similar legislation. PIPEDA applies to all organizations that collect, use and disclose personal information in the course of commercial activity. PIPEDA does not prohibit business practices such as direct marketing, but it does ensure that organizations provide individuals with the opportunity to control the collection, use, and disclosure of their information. The objective of PIPEDA is to establish rules to manage the collection of personal information in a manner that recognizes the right of privacy of individuals and the need of organizations to disclose personal information for business purposes. From PIEPDA, it creates a balance between the needs of the business and the privacy rights of individuals.[7]

America:
There is no national, comprehensive private sector privacy legislation in the United States. However, there are overlapping state and federal statues, regulations, and common law torts for data security requirements but nothing specifically that covers all possible types of personal data. For example, nearly all U.S. states have a breach notification law, and there are federal breach notification requirements for certain personal health and financial data. Most states also have laws mandating reasonable information security, and as well as multiple state laws governing the use of specific data, such as health information, Social Security numbers, financial information, or biometrics, or providing certain privacy notice rights in an online context. Commonly, the U.S. statutes only protect consumers in limited circumstances. For example, FCRA, a US federal law regulates consumer credit reports, such as those related to credit, insurance, housing, and employment, and does not necessarily cover all data brokers’ marketing activities. [8]

Data Broker Accountability and Transparency Act – the DATA Act (S. 668, H.R. 4516)

The Act requires data brokers to provide consumers access to data about them and an opportunity to correct inaccuracies. They would also require the auditing or retracing of internal and external access/transmission to/of that data.

“This bill prohibits data brokers from obtaining or causing to be disclosed personal information or any other information relating to any person by making a false, fictitious, or fraudulent statement or representation, including by providing any document that the broker knows or should know to: (1) be forged, counterfeit, lost, stolen, or fraudulently obtained; or (2) contain a false, fictitious, or fraudulent statement or representation.”

Data brokers must establish procedures to ensure the accuracy of: (1) the personal information they collect, assemble, or maintain; and (2) any other information that specifically identifies an individual, unless the information only identifies an individual's name or address.[9]

Risks

As with most emerging technologies and businesses, Data Brokerage has many risks associated with it. Alleviating these risks are of the utmost importance due to the amount of confidential and sensitive information used in these processes.

Through tracking and web forms, hackers are able to blackmail, spy-on, and cyber extort users. However, the most susceptible risk involved with data brokerage is identity theft [10].

Data brokers hold large amounts of personal data and are somewhat beyond the law when it comes to handling it. Government reports in Canada state that there are no federal statutes requiring companies to disclose breaches of sensitive personal information [11], meaning that even if data were leaked, the public would not know. This demonstrates the need for a higher degree of enforcement and caution by not only the government, but companies and individuals as well.

In addition to the lack of safeguards, hackers have found plenty of value in attacking data brokerages for massive gains. After installing botnet malware in a number of major data servers in the United States, SSNDOB (an identity theft service) were able to gain full access to large databases for months before being detected by virus software [12]. The amount of valuable information that this firm acquired and continue to sell is remarkable, and they continue to work on infecting large data brokerages to this day.

It is also possible for confidential data to be purchased from data brokerages, transferring vast amounts of personal information at one go. The most significant example of a company that does this is Facebook. In order to find out information such as which restaurants you visit, your income, and even the number of credit cards in your wallet, Facebook purchases your offline activity from “a number of different sources” [13]. Major companies that the public generally trusts their personal information with are also involved with the transactions of sensitive information, and they do so without an easy way of opting out of it.

Once sensitive information is passed on, identity theft can quickly take over an individual’s life. Bank accounts, credit cards, wire frauds, tax frauds, insurance frauds and even federal voting can be compromised and used maliciously in an instance behind closed doors to the user.

Sustainability (Looking Forward)

It can be very difficult to feel fully protected from the risks involved with the data brokerage industry and process, but there are steps that anyone can take to drastically reduce their chances of exposure [14].

1) Passwords: Use different passwords for different websites, and ensure that your passwords are unique, yet somewhat meaningless combinations that only you know. Changing them regularly is also crucial to avoid further risks

2) Security Questions: Avoid using the same questions and answers on different websites and change them regularly

3) History: Performing a regular maintenance on your history and clearing browser information and cookies can go a long way in maintaining online security

4) Share Less: Simply put, the less information you have on the internet, the more difficult it is for attackers to gather information on you. Be mindful of what you post on the internet, and remember that once it is online, it stays online.

5) Incognito Browsers: An easy way of avoiding the tracking of your information is to use private or incognito browsers (plugin browsers work as well). They don’t save your personal data or preferences as a normal browser would and can mitigate risks.

6) Fine Print: Be mindful before blindly accepting terms and conditions online. It is easy for your information to be handed over legally due to carelessness with online forms, so going over the fine print is necessary.

Conclusion

Although there are many benefits of using data brokers such as having personalized marketing ads targeted towards individuals and businesses, which may help organizations with their strategy, there are many privacy issues as well. Data brokers or Information brokers are businesses that collect personal information about consumers from a variety of public and nonpublic sources and resell the information to other companies. There are three main applications of data brokers, which are: Risk Mitigation Products, People Search Products, and Marketing Products depending on the type of product/service the brokerage is trying to sell. As companies collect our personal data in hopes of knowing more about consumers, and analyzing strategies to target them, we have to be careful of what information we put online voluntarily or non-voluntarily as companies will use this to their advantage. With the rise in IoT, data brokers are more commonly used as companies need to know more information about consumers, and their buying habits which can be used to their advantage when targeting a particular group. As a result, there are ways to help prevent some data brokers to access this information (as outlined previous sections), but keep in mind that information is easily accessible through public records.

Authors

Hangue Kim Josh Hombrebueno Pritesh Pachchigar Ryan Prasad Zac Wiens
hanguek@sfu.ca jhombreb@sfu.ca ppachchi@sfu.ca rrp4@sfu.ca zwiens@sfu.ca
Beedie School of Business
Simon Fraser University
Burnaby, BC, Canada
Beedie School of Business
Simon Fraser University
Burnaby, BC, Canada
Beedie School of Business
Simon Fraser University
Burnaby, BC, Canada
Beedie School of Business
Simon Fraser University
Burnaby, BC, Canada
Beedie School of Business
Simon Fraser University
Burnaby, BC, Canada

References

  1. https://youtu.be/FqsXqiBifLI Retrieved on 26 July 2017
  2. http://time.com/money/2819049/data-brokers-online-privacy-tools/ Retrieved on 24 July 2017
  3. http://www.businessinsider.com/facebook-data-brokers-2016-12 Retrieved on 22 July 2017
  4. https://www.privacyrights.org/consumer-guides/data-brokers-and-people-search-sites#Any%20laws%20that%20regulate%20data%20brokers Retrieved on 26 July 2017
  5. http://www.trbimg.com/img-581736d8/turbine/ct-data-brokers-personal-info-oversight-20161031 Retrieved on 9 August 2017
  6. http://time.com/money/2819049/data-brokers-online-privacy-tools/ Retrieved on 27 July 2017
  7. https://www.priv.gc.ca/en/opc-actions-and-decisions/research/explore-privacy-research/2014/db_201409/ Retrieved on 28 July 2017
  8. https://www.priv.gc.ca/media/1778/db_201409_e.pdf Retrieved on 29 July 2017
  9. https://www.congress.gov/bill/114th-congress/house-bill/4516/text Retrieved on 30 July 2017
  10. https://www.priv.gc.ca/media/1778/db_201409_e.pdf Retrieved on 22 July 2017
  11. https://www.priv.gc.ca/media/1778/db_201409_e.pdf Retrieved on 22 July 2017
  12. http://www.reuters.com/article/us-cyberattacks-databrokers-idUSBRE98P03220130926 Retrieved on 22 July 2017
  13. http://www.businessinsider.com/facebook-data-brokers-2016-12 Retrieved on 22 July 2017
  14. https://ca.norton.com/16-tips-for-avoiding-online-fraud-and-identity-theft/article Retrieved on 22 July 2017
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