Online advertising

Leave a comment Posted on data usage, Online advertising, Regulation

The fine print

Policymakers have a tough job trying to keep up with the advances made possible by technology. An area they’ve been active in lately is the online advertising industry.  It’s booming. Digital-ad revenues in America in the first half of the year reached a record $32.7billion according to the latest figures from the Interactive Advertising Bureau. 

The Economist recent reported that the Federal Communications Commission (FCC) announced a new rule to protect personal privacy online. Internet-service providers, such as AT&T and Comcast, must now ask consumers for permission if they want to gather and share data deemed to be sensitive, including financial information and users’ browsing history.

Marketers and digital-ad firms insist that they already police themselves well. They consider data on browsing and apps, in particular, to be essential for targeted advertising. Under the FCC’s rule consumers can “opt in” to share this information, but firms fear that many will not.

There is a limit to the FCC’s order, which perversely makes it only more controversial. It will restrict data collection by internet providers, but have little impact on broader online tracking. Notably, it does not affect so-called “edge-providers” such as Google and Facebook, which have operated under a separate privacy framework from another agency, the Federal Trade Commission (FTC).

The order further tilts the advantage to Google and Facebook while the consumer has less clarity than before because now limits for gathering data depend on the identity of the gatherer.  The question now is whether regulators will look at this mishmash and apply stricter limits to Google and Facebook, too. 

I believe it’s time for policymakers and regulators to adopt an approach used by scenario planners for years – the futures wheel, in order to identify 2nd, 3rd, and 4th order implications of proposed rules before they’re enacted.  It will make policymaking more complex in the short run, but would highlight areas key leverage points that would ensure the policy or rule matches the intent.

Leave a comment Posted on E-commerce, Online advertising, Personal Data

How Much is Your Data Worth?

Did you ever think of your personal data as an asset like your car or home or investments?  If not, think again.  In the data broker industry, everything from personal identifying data to social media data to health data is packaged and sold to the highest bidder for annual revenues of almost half a billion dollars per year. That would be $1.76 for every adult 18 and older in the US.  But what data is sold? Where is it collected? The following infographic from MBA@UNC looks at the business of data brokers, how they get their data, and what they sell it for.

The Business of Data Brokers Infographic brought to you by MBA@UNC

But this is not the end of the story.  Sources of highly detailed and granular information can be very valuable to companies.  

Take the digital advertising market. Google and Facebook dominate the digital advertising market by using your data to allow marketers better targeting options.  They use the personal data they acquire to enhance users’ experiences and provide more personally relevant services. In addition, online platforms allow businesses to market their products/services to selected audiences, and reduce the noise of irrelevant advertising for those audiences by enabling interest-based advertising that is based on users’ personal data and demographic characteristics.

This is a very lucrative market.  In 2014, 2013, and 2012, advertising accounted for 92 percent, 89 percent and 84 percent, respectively of Facebook’s revenues.  Advertising is also a major revenue generator for Alphabet (Google), contributing more than 90 percent of the company’s total revenue within the last decade. In 2015 advertising revenues reached nearly $76 billion in 2015, or $276.68 for every adult 18 and over in the U.S.

Firms not only pay for data-based advertising on online platforms. They are also actively expanding their user databases and analyzing qualitatively the trends on the demand side. This can lead them to increase their market shares by designing new products and services that better suit consumer preferences. 

It is difficult to quantify the added value of such processes for firms. But projections seem to indicate the increasing importance of personal data for private and public organizations. 

It’s estimated that in Europe applications built on personal data can provide quantifiable benefits of as much as €1 trillion annually by 2020, with a third of the total accruing to private and public organizations, and two thirds accruing to consumers. This means a benefit for firms of about €330 billion annually by 2020.

Personal data is the oil that lubricates the e-commerce machine.  How do you as a consumer feel about that?