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What You May Not Know About the Boom in Digital User Data

Tuesday, 27 Mar 2012 | 11:49 AM ET

When you’re surfing the web and spot targeted ads based on your prior searches, it’s a jarring reminder that someone — companies, websites and search engines — is following your digital footsteps.

They are also following the money. The volume of personal digital data available is transforming everyday commerce, particularly marketing and advertising.

Companies want to engage and interact with you through multiple platforms that can include emails, mobile devices, social media and online video — and even use that new data trove to spawn new forms such as junk mail. They want you to linger, get to know your likes and dislikes and offer more targeted promotions.

In fact in four years, advertisers will spend $77 billion on digital interactive marketing — as much as they do on TV today, according to research firm Forrester.

With so much money at stake, it’s no wonder companies are retooling how they use metrics and analytics to achieve business goals. Other industries including financial services and health care are also working to capitalize on the data boom.

“In the span of just a couple of years, how we think about customer data has really changed,” says Fatemeh Khatibloo, senior analyst at Forrester, who specializes in customer intelligence, privacy and personal data issues.

The fast-changing industry is breeding startups, which are remaking existing models and platforms to lure more and more venture capital.

Naturally, the volume of personal information has privacy activists concerned about opaque companies and governments potentially abusing their power. Just a year ago in Egypt, then-President Hosni Mubarak shut down Internet access before his government began a crackdown on political protesters.

Lest you think the issue is confined to nondemocratic governments run by despots, protests erupted in January over anti-piracy legislation in the U.S. Congress.

Buying, Selling Your Personal Data

As individual consumers navigate the digital world, the advertising and marketing industry is busy maximizing the growing volume of online metrics and analysis.

Of course the exchange and use of customer user data have been around for decades. What’s changed is the depth of data gathered, and how far and quickly that information is being sold and shared among businesses.

“People have less understanding of what’s going on and how their information is being shared,” says Rebecca MacKinnon, an expert on global Internet policy.

In the next three years, consumers will likely see even more targeted promotions like those of Groupon, and mobile and video advertising, according to a recent Boston Consulting Group report on the evolution of online-user data.

For example, Time Warner Cable allows some home-based customers to download videos from the cable operator. That kind of individual-use data gives advertisers more pointed digital advertising opportunities.

“It’s clear to everyone that the ability to understand more about an individual’s behavior pattern creates a huge amount of value,” says John Rose, a senior partner at BCG and co-author of the report.

Another trend is the emergence of a secondary market for buying and selling user profiles.

For example, if you visit a travel website and book a hotel room, that site can then sell your user profile to an ad network, according to the BCG report. Then the next time you visit a site supported by that ad network, surprise! You’ll get a hotel advertisement based on your prior web activity.

Health Care, Financial Services

Digital consumer intelligence is re-imagining other industries, including health care and financial services.

Managed health-care company Kaiser Permanente, for example, has about 3 million registered users on its website. Members schedule appointments, share data with healthcare providers and receive updates on appointments and prescription refills.

Forrester's Khatibloo sees more health-care companies following Kaiser Permanente, partly because of the broad move to electronic medical records.

“I haven’t had a doctor take notes in a file folder in two years. All of my data is already online,” she says.

Consumers are also migrating toward financial management websites like Mint.com, which features 5 million registered users, according to Forrester. The site offers a single stop for banking, investments and credit data.

Data Lockers

Philippe Lopez | AFP | Getty Images

Looking ahead, Khatibloo sees the emergence of personal data lockers that store consumer information and can be linked to multiple retailers, banks and other businesses.

The idea is to create a simpler digital life. For example, when you buy a car, the purchase, registration and insurance paperwork will be connected online to make your life easier.

Data lockers may also potentially shift the onus of data security to consumers from businesses. But Khatibloo argues in the new digital landscape, responsibility for data security will be shared by individuals and companies.

Businesses “are still responsible for keeping data secure. They’re still not off the hook,” she says.

Corporate, Individual Digital Responsibility

As the digital data world rushes forward, Internet freedom activists hope companies will step up and offer more transparency about what they’re housing.

Search-engine giant Google has already moved in this direction. It releases transparency reports on the number of government inquires for information about users, and requests to remove content.

Just as activism and public awareness pushed once-fringe environmental concerns into the mainstream, a similar process can occur in technology, says MacKinnon, author of a new book “Consent of the Network: The Worldwide Struggle for Internet Freedom.” Change "doesn't just happen naturally," she says.

With consumers only in the nascent stages of understanding the digital domain, most are not ready to think and act meaningfully about digital data rights.

“People haven’t been pushing them (technology companies) because people are so in love with their iPad or cellphones. These companies haven’t been under pressure as other sectors,” MacKinnon says.

Eventually, Khatibloo and other digital sector experts say this will create a more balanced digital ecosystem, where consumers demand bigger roles in shaping and managing their online data.

MacKinnon adds, “We have to start thinking of ourselves as citizens of the Internet, not just passive users. I don’t see how we can bring about change in our digital lives if we don’t take responsibility.”

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