Congress and regulators are taking a closer look at data brokers
-- marketing companies that compile dossiers on consumers,
including data culled from Internet browsing habits and
Most consumers know that advertisers target online ads to them
based on websites they've visited. But experts say most people do
not understand how extensively some companies mine for data,
combining it with data from purchases and other offline activities
and developing profiles of consumers. Those profiles help
businesses in a variety of industries target ads to potential
The companies compiling the information, known as data brokers,
say they have appropriate privacy safeguards in place, and that
their information helps businesses develop offers that are relevant
to consumers. Critics, however, complain that the industry is too
secretive about how it operates and is creating a world of haves
and have-nots based on often-erroneous information.
"They are creating pictures of us without our knowing it, and
they are using it in ways we really don't know," says Jospeh Turow,
a professor at the University of Pennsylvania's Annenberg School
for Communication who studies marketing and digital media. "The
ways that people's profiles get constructed increasingly determine
what kind of pictures of the world they get, and what kinds of
opportunities they get. People who have better profiles will have
better opportunities than people with lesser profiles."
Regulators and lawmakers are starting to notice, too. On
July 24, eight members of the House of Representatives sent letters
to some of the industry's top companies seeking answers on how they
compile and use consumer information. The companies include two of
the three major credit-reporting agencies. The bipartisan eight --
five Democrats and three Republicans -- asked for the companies to
reply by Aug. 15.
In June, the Federal Trade Commission fined a data broker
$800,000 after accusing it of selling consumer profiles as an
employment-screening tool to job recruiters and human resources
personnel without having the required legal safeguards under the
Fair Credit Reporting Act
In March, the FTC released a report calling for new privacy laws
and for the industry to become more transparent in the way it
operates and to give consumers more control over their own data. In
announcing the report, the FTC said: "Data brokers often buy,
compile, and sell highly personal information about consumers.
Consumers are often unaware of their existence and the purposes to
which they use the data."
Most data brokers little-known
The typical consumer has probably not even heard of the companies
that are compiling data on them -- companies with names such as
Acxiom, BlueKai, DataLogix and Epsilon. They gather data from a
variety of sources. Acxiom's Consumer Data Products Catalog, for
instance, offers businesses access to a "comprehensive national
database covering more than 144 million households" that starts
with names and addresses from public records but improves upon that
list by applying "extensive demographic, behavioral, lifestyle,
financial and homeowner real property data." Some databases include
"buying activity from multiple channels ... such as apparel and
electronics purchases," as well as vehicles and real estate.
Another company, DataLogix, lists on its website several
"success stories," such as a major toy retailer that had a strong
customer database but was unsure whether former customers still had
a toddler in the house. "While the client had lost visibility into
those households' buying behavior, (DataLogix) had a very clear
picture of their buying habits including whether or not they were
continuing to buy in the toddler-aged children's category," the
company says on its website. The result: The retailer was able to
cut advertising costs by 70 percent by using the data to target
customers more effectively.
The company says it has data on "almost every U.S.
Acxiom and DataLogix, like other data brokers, have
comprehensive privacy policies and say they follow all industry
privacy guidelines. While acknowledging their databases contain
personally identifiable information, they say they do not traffic
in sensitive data, such as Social Security numbers and data on
children under age 13.
Then there are companies that specialize in online tracking by
installing "cookies" on your computer that give information on
sites you visit. That can help businesses target online ads and
provides Web publishers with needed ad revenue. Many other
companies specialize in delivering targeted ads.
Alternate credit score?
Critics worry that technology has advanced to the point where
companies can access reams of data on consumers from online and
offline sources and use that information to make judgments not only
on what ads to show but also on what kind of financial products to
offer and at what price. They worry that companies could start
using that data like an alternate credit score.
With credit scores, consumers have the right under federal laws
to inspect the data and correct errors in it. Not so with the data
mined by brokers.
"The industry has built up an elaborate system to collect data
on consumers, but they've done hardly anything to ensure that it's
the consumer who makes the decision about what data is collected
and how it can be used when it comes to financial transactions,"
says Jeffrey Chester, executive director of the Center for Digital
Democracy, a consumer-protection nonprofit that follows the digital
Experts say it is not easy to keep yourself from being tracked.
Basic parts of everyday life can yield clues to your behavior and
interests, including using a loyalty card at a supermarket, filling
out a product registration card, completing an online survey,
"liking" a Facebook page, using a search engine and surfing the
Internet or buying something with a credit card.
Most companies that have access to your data have privacy
policies that detail the information they collect and how they
share it, but few consumers probably take the time to read and
Limiting your personal data
There are ways to limit the personal data that companies are
collecting. Internet browsers can be configured to eliminate
cookies, and most data brokers and ad networks allow users to opt
out of receiving Internet-based advertising.
But Jim Brock, founder of PrivacyChoice, a company that rates
the privacy practices of data brokers and websites, says it's
almost impossible to stop companies from compiling data. And many
consumers might not want that, anyway.
"If you wanted to live your life in its entirety in a way that
minimizes tracking, it would be a very different life," Brock says.
"It would mean not going online, not using loyalty cards, not using
coupons. Your life would probably be more expensive. That's a