How Big Data Enables Consumer Profiling

Big data platforms collect so much information about so many people that correlations emerge that allow users to be slotted into marketing categories in unexpected and often unwelcome ways. In one notorious example, the New York Times revealed that companies like Target had found that pregnant women purchased specific combinations of unscented lotion and certain supplements, allowing the creation of a “pregnancy prediction” score to allow marketing of baby-related goods to women who had not publicly revealed to anyone that they were expecting. A data broker like Axciom assigns a 13-digit code to each person and assigns them to 70 “clusters” based on traits such as age, income, race, whether you live in an urban or suburban community, and where you shop.

Increasingly, every transaction, every website viewed, and every action online generates a data trail swept into the data platforms. Most websites invite dozens of companies to track users on their site and follow them across the web. One study found that in 2013, there were 328 separate companies tracking visitors on the top fifty content Web sites. Internet providers like Comcast automatically install tracking tools on their own customers. Each site a consumer uses usually deposits a tiny bit of code on their hard drive, called a “cookie” which allows companies to track and aggregate the overall activity of consumers across the whole Internet. The placement of such online cookies on tens of thousands of website was pioneered by online advertiser DoubleClick, which was acquired by Google in 2007, and allows online advertisers to display different banner ads on any site based on the profile generated by this aggregate data. Companies often bid furiously for the right to place their banner for a particular user. And the ads can follow you around the web; for example, if you view a camera on eBay, companies will bid in an auction for your “cookie” and then display ads related to digital cameras on other web pages you visit.

With the rise of smartphones, advertisers could increasingly sell mobile ads based on the location of any consumer. Apple, Google and mobile phone operators like Verizon and AT&T control data that is of extreme interest to advertisers, since where people live, work and shop often says more about who you are than any other single piece of data. Increasingly, off-line behavior beyond a person’s location is also being combined with online activity to maximize the profiling of users. For example, Facebook has combined demographic and shopping information from data brokers like Acxiom with its own social media-generated data as well as corporate advertisers’ consumer data to better target ads on its network. If consumers buy a product using a loyalty card at a particular store, an ad reflecting that purchase is now likely to show up in their Facebook feed.

The dynamics of online display advertising described above is actually only a minority (19%) of the overall online advertising sector, where Google and Facebook dominate the sector but share revenue with a larger number of players. Far larger is the search-advertising sector (41% of all online advertising) where Google as noted above controls most of the sector and derives an even higher percentage of the revenue. In search advertising, the core product sold are the little text advertisements that appear next to search results, on Gmail pages, and on a range of other Google and affiliated sites across the internet. Particular ads are tied to particular words users type into search engines or based on words on a particular webpage where the advertisements appear. This is combined with whatever other data the search engine has about the particular viewer, from emails sent to friends and colleagues, videos previously viewed, previous online searches, their location and any other interests, demographic information or other behavioral characteristics that the advertising platform knows about the user. Advertisers bid in an auction on these keywords for each any of the desired behavioral and demographic sub-groups that the advertiser is trying to target.

A combination of the highest bid price and the quality of the advertiser’s site determines which ad gets the most prominent placement on the search or affiliated page. An innovation in search advertising is that advertisers don’t pay a dime unless a viewer actually clicks on the ad. It is largely because of the ability to profile users and more precisely target ads that online advertising as a whole has exploded and become the largest advertising sector in the United States. In fact, 2013 was the year Internet advertising surpassed broadcast advertising revenues in the United States for the first time. Online advertising amounted to $42.8 billion in the United States and $117.2 billion globally that year.

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