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Digital marketing: The battle for consumer data

by George Pappachen, Safecount and Nick Nyhan, Dynamic Logic

What do Facebook and the Prime Minster of the UK Gordon Brown have in common? They have both been called out and publicly embarrassed for something that until a few years ago was almost unknown: data protection and consumer privacy.

And why is privacy such a hot topic right now? Because the internet (and digital media) is exploding and teeming with opportunity for those positioned to leverage its unique capabilities for data collection and use.

It’s one reason that the biggest acquisition in online marketing (Google/DoubleClick) was held up for regulatory scrutiny. There is more consumer data being collected now than ever before and, not surprisingly, people want to know how companies are trying to use the accumulated information.

As users travel through the digital ecosystem, little footprints – often innocuous and harmless – are stamped into the soil of computer server files and databases. Most of it is used for basic counting (pages viewed, unique visitors, ads served). But imagine if all the billions of footprints could be stored and analyzed at a high level. Multiple sets of footprints from different places and different times could be grouped together. Potentially these data sets can be tied to specific people or groups of people, along with their purchase history, demographic details, likes and dislikes, who their friends are and what their current location is. Perhaps even information on their genetic code could be added to the profile.

This may be a somewhat scary proposition but it is the future. As Google’s CEO Eric Schmidt quite simply puts it: “The goal is to enable Google users to ask questions such as ‘What shall I do tomorrow?’ and ‘What job shall I take?’”1

Personalised searches like these could be incredibly useful if Google can deliver the right answers – or at any rate answers that individuals find interesting. In order to do that, Google would need to hold a lot of highly personal data. In case you regard this as far-fetched, consider that Google already has an estimated 450,000 servers to store data, and has even invested in a human genetics company, 23andMe.

The ‘digital age’ is also a ‘database age’ with online marketing companies working feverishly to connect the various data dots on consumers in the hopes of improving marketing tactics. This is neither a new pursuit nor exclusive to the internet marketing world. For years, data-driven marketing firms like cataloguers, credit card companies, and direct mail houses have been doing the same thing with subscription, shopping, and credit card data sets. The difference with digital marketing is the increased granularity and the visibility it gives to consumers and consumer advocates.

Facebook embodies many of the major themes of the booming internet advertising marketplace. Size : in just a few years, Facebook has built a sizeable audience (nearly 60 million regular users generating billions of daily impressions). Influence: it received nearly $250 million in ‘strategic’ money from Microsoft. Power : it has become the social gateway for an entire generation of young people.

To capitalize on this, Facebook introduced ‘Social Ads’ and the ‘Beacon’ advertising program in late 2007. Under Beacon, when a Facebook member is active (eg makes a purchase) on a Beacon sponsor’s site an alert or notification of the activity is sent to the member’s network of friends. So if you rent a movie, your friends will know which one.

Social Ads are brand ads shown to Facebook members whose friends interact with a brand’s Facebook profile page. The idea being that news of a friend’s interaction with a brand makes for a more persuasive pitch.

Consumer advocates immediately complained that this program violated established privacy rules on several fronts including its activation without express opt-in and its failure to provide a simple, straightforward opt-out mechanism. Coca-Cola, Overstock.com, and Travelocity – to name just a few brands – either withdrew from the program or bailed out after initial trials.

To its credit, even after a big launch, Facebook reversed course and pulled back on the program in response to user concerns. Facebook CEO, Mark Zuckerberg, made a rare public mea culpa to explain and apologise to its members and the public.

These services are now operated on an opt-in basis. On the internet, the next competitor is just a click away, and CEOs know that concerns over privacy can easily provoke an exodus of digital consumers.

The opposing points of view are stark: where advertisers see precision, personalisation, customisation and accountability, consumers see chilling data collection, identity theft, spyware, and loss of control.

Marketers do not want a digital arms race with consumers over data collection – where each side enlists more powerful technology to block or circumvent the systems the other side has built up! This scenario would not be in the interests of either party.

Instead, the marketing services sector needs to recognise it has a duty to protect the interests of consumers in the growing digital ecosystem by embracing transparency and promoting greater user-controls. Simply posting a privacy policy on your web site is not nearly enough to meet the challenges and provide consumers with the assurances they are demanding.

In the same way that they have accepted they must look after the natural ecosystem, companies need to protect the digital ecosystem, long-term.

Implications for marketers:

  • Admit you are in the data collection business: It doesn’t matter what you sell. Consumer control, privacy, and data collection/security should be considerations for all brands – not just for ‘internet’ companies. If you want to dialogue with consumers online, then you will engage in data collection and use. You need to know how it’s being done and realise that your name is attached to various data collection and data-sharing schemes of third parties working for you or for agencies contracted to you. Get to know them and establish good practices and responsible partners you want to work with long term.
  • Trust is sexy: Brand attributes like ‘innovative’, ‘modern’, ‘for people like me’, ‘stable’, ‘dependable’, ‘fashionable’ and ‘good value’ are still important for many brands – but another attribute that is increasingly important is ‘trustworthy’. Trust is the cornerstone to establishing a digital dialogue with consumers and it needs to be implicitly or explicitly promoted for brand building in a digital age. After all – if everyone is asking for your data – who will you give it to?
  • Educate consumers – sell the concept: Advertising enables a free internet and, if it is a part of the deal, most surveys find consumers prefer it to be relevant. Information collection is at the heart of delivering advertising that is relevant or customised to an individual consumer’s profile. A free internet is part of the argument for consumers agreeing to share some data. Isn’t an ad-supported model better than paying for every website?
  • Make notice and consent real and don’t leave it in fine print: Brands should see online as a core part of their consumer relationships. Respecting consumer wishes online helps grow trust. When consumer data is collected, clear notice should be provided.
  • Consumer control: Most regulatory regimes recognise that consumers have a right to dictate terms on how certain types of data are handled – especially personal or sensitive information. Giving consumers control by having them opt in to personal data collection may suggest a depressed rate of return. In reality it could have the opposite effect. Allowing consumers to control how they engage with data collection, based on their comfort level, is a formula for positive long-term returns. Brands should encourage their online partners to implement consumer-friendly practices. There is a lot to gain by building trust in the internet.
  • Avoiding downstream ignorance: It may seem attractive to hand over digital marketing to a chain of service providers but this can put your brand in compromising positions. Don’t hide behind ignorance about downstream tactics. Brands should contractually require online partners to abide by good consumer-friendly data handling practices. Both regulators and consumers will hold the brand owner accountable for any privacy failures.

Privacy will be increasingly prominent in the digital marketing and advertising space for the next several years. Consider this – we may soon arrive at a point when consumers can decide, based on a given technical feature, which brands they will allow into their digital device (phone, computer, game console, TV). The question is – will your brand be the one allowed in or kept out? If you could buy a device like this – wouldn’t you?

1 The Independent, 24 May 2007: http://www.independent.co.uk/