The Pros and Cons of Data Collection in Marketing

In the world of marketing, the line between a successful product or service and an unsuccessful one is often quite miniscule. Over the past few decades, advertising firms have invested increasing amounts of time, money and resources into research and development regarding the collection of data on consumers. This investment has manifested itself in a great many ways, most notably in the form of market research tactics such as paid surveys. In recent years, however, the rise of the internet as the primary mode of communications around the world has caused a dramatic paradigm shift in the marketing world. The use of anonymous, real time marketing analytics, the collection and dissemination of data from individuals who use internet services is being used ever more frequently, in a major departure from what had previously been a primarily consenting and knowledgeable transaction in traditional market research. This type of data collection is used track specific information on individuals, from their purchasing preferences, to their geographical locations, in order to provide better, more accurate advertising. Whether this is something to be feared as an invasion of privacy, or something to be heralded as a new age of capitalistic progress, remains to be seen.

At the forefront of the push to move away from traditional market research in favor of digital analytics collections, is Google, Incorporated. Google, Inc. is an American multi-national corporation specializing in the navigation of the internet, through its famous search engine. Google did not begin as a capitalistic venture, however; it was founded in 1996 by current CEO Larry Page and a fellow classmate of his at Stanford University, Sergey Brin. The two were in the process of earning their doctoral degrees from Stanford in computer science, and had begun Google as a project that would form the basis of their respective theses. While previously built, conventional search engines on the internet had been ranking the results they provided by the number of times specific keywords appeared on a given page, Sergey Brin and Larry Page theorized a better, more convenient and more accurate process of ranking the web pages returned by a search engine. They created a new type of search algorithm, which they called PageRank, which would determine a webpage’s relevance by the number of pages and the importance of those pages, which linked back to the original website1. Originally named “BackRub,” due to the search engines ability to check backlinks in order to estimate the importance of a site, Page and Brin decided to change the name to “Google,” which was derived from a misspelling of the term “googol,” a one followed by one hundred zeros. In August of 1998, the co-founder of Sun-Microsystems, Andy Bechtolsheim, presented the first public offering for the search engine Google, contributing $100,000 dollars before Google became incorporated. Citing their beliefs that the search engine they had created was taking up too much of their time and inhibiting their academic pursuits, Larry Page and Sergey Brin went to Excite, Inc. CEO George Bell and offered to sell the search engine for $1 Million dollars; the offer was rejected. In 1999, Page and Brin secured an initial round of $25 million dollars-worth of funding. The following year, Google began selling advertisements associated with search keywords. On August 19th, 2004, Google, Inc. had its initial public offering (IPO), in which it offered nearly 20 million shares at $85 dollars a share. Larry Page and Sergey Brin would also be contractually locked into employment with Google, Inc. until the year 2024.

Google, Inc.’s business model is actually fairly ingenious: 97% of their revenue comes from advertising and in turn, this allows them to provide services to the general public nearly for free2. The more advertising Google sells the more free applications and services they can provide to the general public. The more applications and services they freely provide to the general public, the more web traffic and usage they receive. The more web traffic and usage Google receives as a whole, the more lucrative their advertising services become. This business plan has cycled through itself often enough over the past several years that Google has gone from the pet project of a couple of doctoral students at Stanford, to one of largest, most profitable companies in human history in less than 15 years. The link between data collection and Google, Inc.’s highly successful business plan, however, is not so impressive. The reason Google’s advertising services are so lucrative and highly coveted, is partially because of the sheer number of users that can be reached by a search engine and email provider that truly has no equal in the private sector. However, Google also retains its own propriety blend of data collection algorithms that allow it to stay on top of the marketing world in terms of delivering the most accurate consumer statistics. Among the data collected by Google are things like your IP address, the type of browser you’re searching with, the language in which you’re searching, the date and time of your request and several cookies that will identify your browser anywhere else you travel on the web3.

The second major company to be complicit in the practice of marketing data collection is Facebook, Inc. Facebook was unofficially founded by then Harvard University student Mark Zuckerberg on February 4th, 2004, as “thefacebook.com”3. Following the launch, three Harvard University students by the names of Tyler Winkelvoss, Cameron Winkelvoss and Divya Narendra filed a lawsuit against Zuckerberg, due to their assertions that he had agreed to help them build their own social networking site, “HarvardConnection.com,” and had instead used their ideas to build a competing product. In 2005, the company dropped “the” from its name and purchased the domain www.facebook.com for $200,000 dollars. On September 26, 2006, Facebook became available to any individual over the age of 13 with a valid email address. By 2011, Facebook was the second most frequented site in the entirety of the internet, behind only Google4. On May 17th, 2012, Facebook, Inc. held its initial public offering at a negotiated share price of $38 dollars. The company was valued at $104 Billion dollars, the highest valuation in history for a newly listed publicly traded venture.

The business model of Facebook, Inc. may in fact be even more ingenious than that of Google, Inc. Facebook is, for all intents and purposes, a social networking tool; the primary objective of the site is to remain in contact with friends, acquaintances, family and coworkers, and attempt to make new contacts as well. In order to do this, one must construct a Facebook profile. What this entails is the dissemination of personal information to Facebook. This includes your name, your age, where past and current educational institutions attended, your past and current occupations and even your likes and dislikes for a variety of different subjects. This includes all types of media, from books to television shows, movies to magazines. Additionally, you can choose to share even more preferences than that; Facebook offers you the ability to share your political ideology, your food preferences or anything and everything that can possibly be marketed or considered valuable information for advertising firms. This is, of course, what they do with that information: Sell it. All of the information that you willfully upload to Facebook, officially gives Facebook, Inc. the right to disseminate that information to whomever they wish for profit. This allows them to maintain an astronomically high profit margin, much in the same sense as Google, Inc., while providing ever more free services for its users. The more free services it provides the more users it will attain. The more users Facebook attains, the more information they have to sell. The more information they have to sell, the more money they make. The more money they make, the more free services they can provide.

As a consequence of the private sectors development of the ability to collect information on individuals en masse, there have been many attempts, some publicized and some not, of the United States government to reign in that specific information. The interest of the United States government in this type of technology and data collection, however, is not in the commercial sense. Rather, it is maintained that the exploitation of such information would be used to properly accentuate programs dealing with matters of national security. The very first publicized attempt by the United States to procure for themselves a database of this nature was the creation of the Total Information Awareness Office5. Established in January of 2002 following the September 11th, 2001 terrorist attacks, the Total Information Awareness Office was a subsidiary of the Defense Advanced Research Projects Agency (DARPA) which sought to create enormous computer databases which would gather and store the personal information of everyone in the United States. Defunded by congress in 2003, under the pretense that such a system could lead to the unwarranted use of mass surveillance, the stated goals of the Total Information Awareness Office were essentially divided among different government agencies under different names, with vast portions of the project having been outsourced to private contractors. In May of 2013, the existence of the data collection program “PRISM” was leaked by former Central Intelligence Agency employee and government contractor Edward Snowden6. The program had been reassembled from the remains of what had been the mission of the Total Information Awareness Office, and began collecting data on individuals, American citizens and otherwise, in late 20077. This had been accomplished through the passage of an amendment to the Foreign Intelligence Surveillance Act of 19788. According to a lawsuit filed by the ACLU following the passage of the bill, “Unlimited surveillance of the communications and conversations of American citizens by the federal government could be initiated by only the allegation of intent, regardless of fact”9.

Additional consequences to the private sectors usage and development of data collection software and practices bound, most notably in the accusations fielded by tech giants such as Google, Apple, Facebook and Microsoft. According to documents leaked regarding the National Security Agencies PRISM surveillance program, the following dates pinpoint when PRISM data collection began for the following internet service providers, after the passage of the Foreign Intelligence Surveillance Act of 1978 Amendments of 200810:

- September 9th, 2007: Microsoft

- March 12th, 2008: Yahoo

- January 14th, 2009: Google

- June 3rd, 2009: Facebook

- December 7th, 2009: PalTalk

- September 24th, 2010: YouTube

- February 6th, 2011: Skype

- March 31st, 2011: AOL

- October 2012: Apple

Despite the documented links between these corporate entities and the United States government’s mass surveillance programs, many of the listed entities flatly deny their involvement or complicity in the success of the program. Google CEO Larry Page took to the internet to assure the public that Google had never supplied the United States government with any information regarding its users, except when required by law11. Facebook founder Mark Zuckerberg took to his own website and profile during the summer of 2013 in order to dispel any public angst over the potential dissemination of their Facebook information to the U.S. government under the very same pretenses12. The potential abuse of the data collection technologies employed by these companies, and exploited by a government entity in just such a fashion, is touched upon in great detail in author Siva Vaidhyanathan’s “The Googlization of Everything (And Why We Should Worry)” in the third chapter, entitled “Universal Surveillance and Infrastructural Imperialism13.”

Unfortunately for consumers, the creation of consumer databases and data collection programs, protocols and algorithms designed to give the general public a more integrated and personalized service has been taken advantage of by the United States government. Despite the drawbacks this presents, there are many positive advantages for the everyday consumer because of the widespread usage of these technologies. To begin with, the services provided by advertising firms have been historically hit or miss due to their reliance on potentially incorrect methodologies regarding information derived from their consumers. To state it bluntly, classic market research techniques such as paid surveys are generally not as reliable or useful in a business sense as they are purported to be. Many people do not take these market research ploys seriously, and instead apply or enroll simply because of the monetary compensation. While this incentivized approach functions in exactly the way it is supposed to, it has the unfortunate side effect of only drawing in those with the time or inclination to participate. The switch to online consumer analytics, compiled simply from your personal information as divulged on the web, allows market research companies to do away with this old standard and begin serving you, the consumer, with the types of advertising services that are applicable to you, rather than what they think may be a blanket cover for a particular demographic, geographical region or other grouping14. Additionally, the access to online preferences and information that marketers currently enjoy allows them to craft advertising campaigns in a much more personalized manner, rather than simply relying on the demographics an individual might match. For example, if you have been searching for exercise equipment on the internet, you now will be met in the sidebars and margins of web pages you frequent with advertisements for exercise equipment and providers of exercise equipment. Another example might be if the individual in question is travelling or has arrived in a new city, state or country. The advertisers, knowing this from the information gleaned from various Google searches or Facebook statuses, can then articulate relevant goods and services that can be of use to the individual, such as rental car or hotel room services at their destination. These search queries and other information of the sort are compiled by the advertising agencies in an attempt to catalogue the consumers past preferences and purchases, so that they can better understand and apply this information when crafting ads for future use, by you. In essence, the application of catalogued personal information on individual consumers returns dividends in the marketing world for the consumer, much in the same way they might experience said dividends if they were a frequent patron at a local bar; when the bartender or server recognizes you by name, or remembers your drink order, it is indicative of good service, and this is the type of service and experience advertisers wish to bring to your online shopping and ad experiences as a consumer. In the present day, even more new technologies are being researched and announced in order to bolster the customization options for this already intensely personal service. Facebook has recently been experimenting with several different technologies in order to expand its data collection services, according to an editorial by Steve Rosenbush of the Wall Street Journal. According to the editorial, Facebook Analytics Chief said in an interview, “The social network may start collecting data on minute user interactions with its content, such as how long a user’s cursor hovers over a certain part of its website, or whether a user’s newsfeed is visible at a given moment on the screen of his or her mobile phone15.”

In light of the many advantages to data collection and analysis in advertising, the disadvantages of having technology that can track individuals based upon any number of arbitrary factors are many. As mentioned in the previous portions of this paper regarding the Total Information Awareness Office and the subsequent mass surveillance efforts of the PRISM data collection program, the opportunity for state and federal governments to operate systems such as these that piggyback on the investments and developments created and received by private sector advertising firms is startling. The level of sophistication of this type of technology, should its development go on unabated, could potentially soon make the world of advertising nearly unrecognizable. Additionally, it may also become, should new legislation not be put in place to limit the powers available to the federal government in their surveillance attempts, almost indistinguishable from programs such as PRISM. The implications of this are actually quite scary, as while the intent to remain a stabilizing security force between American citizens and foreign terrorists or individuals and/or groups that would cause us harm is certainly noble, the fact remains that the lack of controls on such behavior and the unprecedented access to the analytics compiled by private companies could be used for less than savory reasons, in a very real sense. Furthermore, the incentives of private firms to continue to purchase the collected data and the subsequent incentivized nature of investing in this type of technology by social networking sites and search engines, may only serve to further intrude into our private lives. In a world where both private and public entities alike have this type of tracking technology at their disposal, it brings to mind many of the themes written about in George Orwell’s seminal text “1984,” regarding the ethical implications of maintaining surveillance over individuals who may not, in fact be open to such conduct16.

While the nature of arguments insisting that the data collection technology championed by marketing firms is ripe for exploitation by public entities is generally chalked up to alarmist fervor, the fact remains that such conduct is a very real threat. That being said, the positive implications of such technology on the consumer base in the American economy has been palpable, and we may very well continue to see increased levels of circulation as advertisers hone their algorithms and become more adept at tracking consumer preferences.

References

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2. Golson, J. (2009, July 17). Where Does Google Get 97% of Its Revenue? — Tech News and Analysis. Gigaom. Retrieved December 5, 2013, from http://gigaom.com/2009/07/17/where-does-google-get-97-of-its-revenue/

3. Phillips, S. (2007, July 25). A brief history of Facebook. The Guardian. Retrieved December 4, 2013, from http://www.theguardian.com/technology/2007/jul/25/media.newmedia

4. Fernandes, R. (2011, December 31). Facebook second most accessed site, behind Google in the US. Tech2. Retrieved December 5, 2013, from http://tech2.in.com/news/web-services/facebook-second-most-accessed-site-behind-google-in-the-us/268862

5. (2003). Total Information Awareness (DARPA's Research Program).Information & Security, 10, 105 - 109.

6. Yan, B., Smith, C., & Yan, H. (1970, January 1). Man behind NSA leaks says he did it to safeguard privacy, liberty.CNN. Retrieved December 5, 2013, from http://www.cnn.com/2013/06/10/politics/edward-snowden-profile/

7. The NSA's Slideshow Explaining its PRISM surveillance program. (n.d.). Forbes. Retrieved December 5, 2013, from http://www.forbes.com/pictures/efdk45edd/prism-slide-1/

8. Foreign Intelligence Surveillance Act of 1978 Amendments Act of 2008. (2008, July 10). Public Law. Retrieved December 5, 2013, from http://www.intelligence.senate.gov/laws/pl110261.pdf

9. American Civil Liberties Union. (n.d.).American Civil Liberties Union. Retrieved December 5, 2013, from https://www.aclu.org/national-security/fix-fisa-end-warrantless-wiretapping

10. Greenwald, G., & MacAskill, E. (2013, June 7). NSA Prism program taps in to user data of Apple, Google and others.The Guardian. Retrieved December 3, 2013, from http://www.theguardian.com/world/2013/jun/06/us-tech-giants-nsa-data

11. Ngak, C. (2013, June 12). Google CEO Larry Page issues statement on PRISM.CBSNews. Retrieved December 5, 2013, from http://www.cbsnews.com/news/google-ceo-larry-page-issues-statement-on-prism/

12. Zuckerberg, M. (2013, June 7). Mark Zuckerberg . Facebook. Retrieved December 5, 2013, from https://www.facebook.com/zuck/posts/10100828955847631

13. Vaidhyanathan, S. (2011). The Googlization of Us: Universal Surveillance and Infrastructural Imperialism. The Googlization of everything: (and why we should worry) (pp. 82 - 114). Berkeley: University of California Press.

14. Julian, J. (2013, July 10). Benefits of Marketers Having Your Information.Adobe Digital Marketing Blog. Retrieved December 5, 2013, from http://blogs.adobe.com/digitalmarketing/personalization/benefits-of-marketers-having-your-information/

15. Rosenbush, S. (2013, September 30). Facebook Tests Software to Track Your Cursor on Screen. The CIO Report RSS. Retrieved December 5, 2013, from http://blogs.wsj.com/cio/2013/10/30/facebook-considers-vast-increase-in-data-collection/

16. Moss, S. (2013, June 12). George Orwell back in fashion as Prism stokes paranoia about Big Brother. theguardian.com. Retrieved December 5, 2013, from http://www.theguardian.com/books/booksblog/2013/jun/11/george-orwell-prism-big-brother-1984