Data Brokers: The Silent Giants of the Data Economy
Data brokers are private individuals or, more often, companies specialized in the collection, purchase, and sale of information about individuals for profit. They collect, clean, and organize data before licensing it to businesses and financial institutions. The process of gathering information includes sourcing it from other companies. Such as credit card firms, as well as conducting online research to gather public data from social media platforms like LinkedIn, Instagram, and Facebook. This practice closely resembles Open Source Intelligence (OSINT), a method of gathering publicly available online data.
These companies operate in a rapidly growing sector, generating over 200 billion euros annually. This growth shows no signs of slowing down, especially considering the vast amount of data created each year. For example, in 2020, an estimated 1.7MB of data was produced per person every second. The rise of the internet, the widespread use of applications like GPS and the digitization of fingerprinting and facial recognition are key contributors to this valuable data.
Types of Collected Data
Data brokers gather a wide range of personal information. This includes names, addresses, phone numbers, age, gender, income, religious beliefs, school attended, and profession. They aggregate these details to create audience segments, also known as user segments, which are then sold to businesses. When used for online advertising, platforms like AdTech focus more on purchase history and website activity. They use demographic information like age, gender, and income to improve targeting accuracy.
Primary Data
Primary data is collected directly from raw or original sources. This includes information gathered directly from consumers through surveys, forms, transactions, or online interactions. It is « original » in the sense that it has not been processed by another entity before collection. For example, a data broker collecting information directly from a user’s online form has access to primary data. Primary data is often considered more accurate and relevant for specific analysis.
Third-Party Data
Third-party data comes from indirect sources. It is not directly collected by the data broker but comes from external sources, like other companies or organizations. For instance, a data broker may buy or access data collected by other companies, public agencies, or other data brokers. Third-party data is often used to complement or enhance primary data. These might include public records or company databases that already include purchasing histories, demographic data, or online behaviors. While third-party data may be less specific, it helps expand the scope of insights.
How Do They Collect This Data?
Data brokers gather data through various means. Social media platforms, website histories, and both online and offline purchase histories all contribute to their information pool. Even documents like driving licenses, vehicle records, census data, birth certificates, and marriage licenses can provide valuable data.
Data brokers track activities both online and offline. Social media APIs, mobile apps, and e-commerce sites offer windows into your actions. Offline activities can be tracked through public records (e.g., marriage bans, property registers, or professional licenses) and store loyalty programs.
This practice, known as web tracking, is made possible by software installed on most websites and apps. These tools track your online behavior, such as clicks, page views, time spent on a site, and even mouse movements. All this data is aggregated to create an implicit profile that helps data brokers classify users based on their likely purchasing intent.
How Do Data Brokers Generate Revenue?
Data brokers generate revenue through various key methods, each designed to address different business needs. One of the primary ways they profit is by selling data packets. This to companies seeking specific insights about current or potential customers. These data packets often contain demographic information, purchasing habits, behavioral preferences, or location details. Companies use this data primarily for targeted advertising, market segmentation, and to inform strategic decisions about their products or services.
However, some brokers opt not to sell data outright but instead lease it to businesses for a set period. This method benefits companies needing access to certain data for short-term projects while allowing brokers to maintain ownership of the data and resell or lease it again in the future. Additionally, many brokers offer data analysis and enrichment services. By processing and cross-referencing various data sources, they provide valuable insights, such as identifying market trends or discovering new opportunities. This helps businesses make more informed decisions about their marketing strategies and operations.
Models of operation
Brokers also create highly targeted lists of prospects based on specific criteria such as age, income, profession, or purchasing behavior. These lists are sold to companies looking to reach a niche audience with their marketing campaigns. Thereby improving the precision of their outreach. Moreover, data brokers help businesses refine their targeted advertising efforts. By tailoring advertisements to specific audiences, companies can increase the effectiveness of their campaigns, reaching the right people with the right message at the right time.
Some data brokers operate on a subscription-based model, offering businesses regular access to updated data through a platform or portal. This allows companies to have continuous, real-time access to fresh data, helping them stay current and make timely decisions. Additionally, brokers sometimes form partnerships and affiliations with other companies or online platforms to share data or gain access to user information. By collaborating, both parties can maximize their revenue and expand their reach in the market. Finally, brokers profit by selling behavioral data, which includes information on how users interact with websites, apps, or products. This data allows businesses to optimize their marketing strategies, improve product offerings but also to enhance user interfaces to better meet consumer needs.
Is it legal?
The legality of data brokers’ activities depends on local laws and regulations and how they collect, use, and sell data. In many parts of the world, personal data exploitation by brokers is legal, but it must comply with specific rules.
Use of Law
Indeed, there are several laws to regulate personal data collection and use. Data brokers must comply with these regulations or face penalties. General Data Protection Regulation (GDPR) in Europe is a regulation imposes strict requirements on the collection, processing, and sale of personal data. It mandates that companies obtain explicit consent from individuals before collecting their data and use it for specific purposes. California Consumer Privacy Act (CCPA) in the U.S. is a law that protects consumer privacy by giving individuals rights like knowing what data is collected, correcting it, and preventing its sale to third parties. Consumer Privacy Protection Act (Privacy Act) in Australia obligates data brokers to comply with similar laws in Australia, ensuring personal data protection.
Legality of data collection
Collecting public data (like information available in public databases) is generally legal, as long as data brokers follow local regulations. However, gathering sensitive data or personal information without consent can violate privacy laws and also expose brokers to lawsuits. A critical part of data brokers’ legal activities is transparency and obtaining user consent. Many countries require companies to inform users about how their data is collected, used, and shared. Failure to obtain explicit consent can lead to severe penalties. In addition, selling personal data can be legal under certain regulations. However, it poses legal risks if brokers fail to follow rules or violate consumer rights.
For example, selling data without consent or sharing sensitive information without proper safeguards can breach privacy laws. Some sectors, like healthcare and finance, have specific rules governing data collection and sharing. For instance, in healthcare, laws like HIPAA (Health Insurance Portability and Accountability Act) in the U.S. protect individual medical data. Finally, brokers who fail to comply with privacy laws may face hefty fines or legal action. Authorities, like the Data Protection Authority in France or the Consumer Protection Bureau in the U.S. can impose severe penalties for violations. In conclusion, data brokers can legally operate. However, they must navigate a complex web of regulations to ensure they respect individual privacy rights. Failure to do so can result in significant legal consequences.
Conclusion
In conclusion, data brokers have established a lucrative industry by collecting, analyzing, and selling vast amounts of personal and behavioral data. Through various methods, including data sales, leasing, analysis, and partnerships, they provide valuable insights to businesses, enabling targeted marketing, better product development, and informed decision-making. While their services offer significant benefits to companies looking to enhance their reach and efficiency, the practices raise important questions about privacy and the ethical use of personal information. As the industry continues to grow, the need for stricter regulations and transparency in data collection and use becomes increasingly crucial to protect consumer rights.
