Mapping digital genome

Using latest technologies, data brokers are building 360-degree profiles of online users. While they are decimating privacy, legal oversight is yet to catch up, says Natasha Singer

It peers deeper into your life than any governmental agency or those prying digital eyes at Facebook and Google. If you are an American adult, the odds are that it knows things like your age, race, sex, weight, height, marital status, education level, politics, buying habits, household health worries, vacation dreams – and on and on.

Right now in Conway, Arkansas, north of Little Rock, more than 23,000 computer servers are collecting, collating and analysing consumer data for a company that, unlike Silicon Valley’s marquee names, rarely makes headlines. It’s called the Acxiom Corp., and it’s the quiet giant of a multibillion-dollar industry known as database marketing.

Analysts say Acxiom has amassed the world’s largest commercial database on consumers – and that it wants to know much, much more. Company executives have said its database 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.
Such large-scale data mining and analytics – based on information available in public records, consumer surveys and the like – are perfectly legal. Acxiom’s customers have included big banks like Wells Fargo and HSBC, investment services like E(AST)Trade, automakers like Toyota and Ford, department stores like Macy’s – just about any major company looking for insight into its customers.

For Acxiom, based in Little Rock, the setup is lucrative. It posted profit of $77.26 million in its latest fiscal year, on sales of $1.13 billion.

But such profits carry a cost for consumers. Federal authorities say current laws may not be equipped to handle the rapid expansion of an industry whose players often collect and sell sensitive financial and health information yet are nearly invisible to the public.
Julie Brill, a member of the Federal Trade Commission, says she would like data brokers in general to tell the public about the data they collect, how they collect it, whom they share it with and how it is used.

“If someone is listed as diabetic or pregnant, what is happening with this information? Where is the information going?” she asks. “We need to figure out what the rules should be as a society.”

Although Acxiom employs a chief privacy officer, Jennifer Barrett Glasgow, she and other executives declined requests to be interviewed for this article, said Ines Rodriguez Gutzmer, director of corporate communications.

In interviews, security experts and consumer advocates paint a portrait of a company with practices that privilege corporate clients’ interests over those of consumers and contradict the company’s stance on transparency.

Digital marketers already customise pitches to users, based on their past activities. Just think of “cookies,” bits of computer code placed on browsers to keep track of online activity. But Acxiom, analysts say, is pursuing far more comprehensive techniques in an effort to influence consumer decisions. It is integrating what it knows about our offline, online and even mobile selves, creating in-depth behaviour portraits in pixilated detail.
“There’s a lot of players in the digital space trying the same thing,” says Mark Zgutowicz, a Piper Jaffray analyst. “But Acxiom’s advantage is they have a database of offline information that they have been collecting for 40 years and can leverage that expertise in the digital world.”

Yet some prominent privacy advocates worry that such techniques could lead to a new era of consumer profiling. Jeffrey Chester, executive director of the Center for Digital Democracy, a nonprofit group in Washington, says: “It is Big Brother in Arkansas.”
Scott Hughes, a fictional character, appeared in an Acxiom investor presentation in 2010. A frequent shopper, he was designed to show the power of Acxiom’s multichannel approach.

In the presentation, he logs on to Facebook and sees that his friend Ella has just become a fan of Bryce Computers, an imaginary electronics retailer and Acxiom client. Ella’s update prompts Hughes to check out Bryce’s fan page and do some digital window-shopping for a fast inkjet printer.

When Hughes follows a link to Bryce’s retail site, for example, the system recognises him from his Facebook activity and shows him a printer to match his interest. He registers on the site but doesn’t buy the printer right away, so the system tracks him online. Lo and behold, the next morning, while he scans baseball news on ESPN.com, an ad for the printer pops up again.

That evening, he returns to the Bryce site where, the presentation says, “he is instantly recognized” as having registered. It then offers a sweeter deal: a $10 rebate and free shipping.

It’s not a random offer. Acxiom has its own classification system, PersonicX, which assigns consumers to one of 70 detailed socioeconomic clusters and markets to them accordingly.  Correctly typecast, Hughes buys the printer.
There is a fine line between customisation and stalking, say critics. While many people welcome the convenience of personalised offers, others may see the surveillance engines behind them as intrusive or even manipulative.

Acxiom maintains its own database on about 190 million individuals and 126 million households in the U.S. Separately, it manages customer databases for or works with 47 of the Fortune 100 companies. It also worked with the government after the September 2001 terrorist attacks, providing information about 11 of the 19 hijackers.

Privacy advocates say they are troubled by data brokers’ ranking systems, which classify some people as high-value prospects, to be offered marketing deals and discounts regularly, while dismissing others as low-value – known in industry slang as “waste.”
Exclusion from a vacation offer may not matter much, says Pam Dixon, the executive director of the World Privacy Forum, a nonprofit group in San Diego, but if marketing algorithms judge certain people as not worthy of receiving promotions for higher education or health services, they could have a serious impact.

Acxiom’s Consumer Data Products Catalogue offers hundreds of details – called “elements” – that corporate clients can buy about individuals or households to augment their own marketing databases. Companies can buy data to pinpoint households that are concerned, say, about allergies, diabetes or “senior needs.”

The catalogue also offers delicate information that has set off alarm bells among some privacy advocates, who worry about the potential for misuse by third parties that could take aim at vulnerable groups. Acxiom also sells data about an individual’s race, ethnicity and country of origin. “Our Race model,” the catalogue says, “provides information on the major racial category: Caucasians, Hispanics, African-Americans, or Asians.” Competing companies sell similar data.

There may be a legitimate commercial need for some businesses, like ethnic restaurants, to know the race or ethnicity of consumers, says Joel R. Reidenberg, a privacy expert and a professor at the Fordham Law School.

“At the same time, this is ethnic profiling,” he says. “The people on this list, they are being sold based on their ethnic stereotypes. There is a very strong citizen’s right to have a veto over the commodification of their profile.”

“Do you really know your customers?” Acxiom asks in marketing materials for its shopper recognition system, a program that uses ZIP codes to help retailers confirm consumers’ identities – without asking their permission.

“Simply asking for name and address information poses many challenges: transcription errors, increased checkout time and, worse yet, losing customers who feel that you’re invading their privacy,” Acxiom’s fact sheet explains. In its system, a store clerk need only “capture the shopper’s name from a check or third-party credit card at the point of sale and then ask for the shopper’s ZIP code or telephone number.” With that data Acxiom can identify shoppers within a 10 percent margin of error, it says, enabling stores to reward their best customers with special offers. Other companies offer similar services.
“This is a direct way of circumventing people’s concerns about privacy,” says Chester of the Center for Digital Democracy.