Trend #1: Digital Advertising Comes of Age and Continues to Propel the Growth of Data Brokers and Markets

By Mary Ludloff & Terence Craig

Authors’ Note: As promised, this is trend number one in our take on the top ten privacy trends or the more things change, the more they stay the same. Although similar to David Lettermen’s Top Ten lists, our list is not as funny (unless we get points for sarcasm). We would like to remind you that sifting through the media coverage, books, blog posts, and research studies has been no easy task and trying to understand how all of it fits into the larger privacy landscape has been even harder. Added to that, our list is sure to elicit a litany of trends that we missed. We certainly hope that it does and welcome your input in our comments section! Now, on with the trend number one!

It is safe to say that continued media attention (mostly negative) has not had an impact on the rising use of third party tracking mechanisms to collect personal information. According to the Web Privacy Census, an undertaking sponsored by the Berkeley Center for Law and Technology, which measures and benchmarks Internet tracking over time:

• The number of cookies discovered on the top 100, 1,000, and 25,000 websites are all significantly increasing. For example, in May of 2012 5,795 cookies were found on the top 100 sites and in October of 2012 the number reached 6,485.
• The percentage of cookies set by a third party host was 84.7%. In other words, most of us are being tracked by a host of parties that we have no data collection agreement with.
• The top trackers were BlueKai (the largest online auction marketplace), Rubicon Project (one of the larger real-time bidding systems that sells ad space on web pages), and Adnxs (the advertising exchange for advertising exchanges).

It’s clear that data collection is big business, increasing by 400% year-over-year, with 54% of that activity “beyond publishers’ control (compared to 31% the previous year).”[1] So while first party collectors continue to urge all of us to give them information about us, third party collectors continue to hijack that data to use for their own business models—a practice some call data fracking. According to online privacy firm Abine, there are more than 200 data collection companies and ad networks that “…use 600 different tracking technologies to gather and sell information on people’s web habits.”

Along with the rise in third party data collection, the increasing prevalence of real-time bidding, where buyers and sellers enter into a sort of real-time auction to agree on a price for an ad impression, is a digital advertising game changer. As Google AdWords commoditized search, real-time bidding systems are poised to commoditize the digital world. We are no longer being advertised to in buckets but as unique individuals and advertisers are competing for our singular attention:

“The odds are that access to you — or at least the online you — is being bought and sold in less than the blink of an eye. On the Web, powerful algorithms are sizing you up, based on myriad data points: what you Google, the sites you visit, the ads you click. Then, in real time, the chance to show you an ad is auctioned to the highest bidder.”

And our data is becoming more valuable to the digital ad buyer. In 2012, worldwide digital ad revenues were $102 billion. In 2013 it was $119.84 billion and is projected to reach $137.84 billion in 2014. By 2017, real-time bidding is predicted to account for more than $8.49 billion in digital ad spending, which is 29% of the total market.

Perhaps more troubling is the blurring of lines between the data collectors and brokers. For example, Facebook, unarguably the holder of the most valuable personal data trove, has partnered with the three largest U.S. data brokers: Datalogix, Acxiom, and Epsilon. What this means to consumers is the merging of offline and online activities—for example, what you buy with your loyalty card at Safeway can be used to measure the effectiveness of Facebook ads served up to your demographic for a particular product.

Data brokers (those companies that sell information about us) continue to reap the very profitable benefits of the big data world we now inhabit. For example, Acxiom recorded more than $1.3 billion in sales in 2012 and has a:

“…database [that] contains information about 500 million active consumers worldwide, with about 1,500 data points per person. That includes a majority of adults in the United States.”

But for now, much of what data brokers know about us remains a mystery as most are unwilling to share their profiles with the consumers they track. And while medical records are confidential and there are strict guidelines regarding credit reports, according to the FTC:

“There are no current 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.”

From your name, address, age, race, occupation, and education level to life-event triggers (like marriage, pregnancy, birth, divorce), along with hobbies, things you might want to buy, and the kinds of books you like to read—the data broker probably knows more about you than you do and this information is put to what some might call questionable use by government agencies, businesses, and other organizations:

“The profiles allow marketers, politicians and businesses to predict consumers’ futures… whether we will be a big and low-wage lifetime earner, how we may respond to medical concerns and whom we can be persuaded to vote for.”

It’s clear that “our” data is for sale and is being used to support a myriad of business models. So if you thought that data brokers only served the digital advertising market, think again.

[1] Krux Research Shows 400% Year-Over-Year Growth in Data Collection, Krux Research, June 12, 2012