“In 2012, the data broker industry generated 150 billion in revenue that’s twice the size of the entire intelligence budget of the United States government—all generated by the effort to detail and sell information about our private lives.”
— Senator Jay Rockefeller IV
“Quite simply, in the digital age, data-driven marketing has become the fuel on which America’s free market engine runs.”
— Direct Marketing Association
Google is very secretive about the exact nature of its for-profit intel operation and how it uses the petabytes of data it collects on us every single day for financial gain. Fortunately, though, we can get a sense of the kind of info that Google and other Surveillance Valley megacorps compile on us, and the ways in which that intel might be used and abused, by looking at the business practices of the “data broker” industry.
Thanks to a series of Senate hearings, the business of data brokerage is finally being understood by consumers, but the industry got its start back in the 1970s as a direct outgrowth of the failure of telemarketing. In its early days, telemarketing had an abysmal success rate: only 2 percent of people contacted would become customers. In his book, “The Digital Person,” Daniel J. Solove explains what happened next:
To increase the low response rate, marketers sought to sharpen their targeting techniques, which required more consumer research and an effective way to collect, store, and analyze information about consumers. The advent of the computer database gave marketers this long sought-after ability — and it launched a revolution in targeting technology.
Data brokers rushed in to fill the void. These operations pulled in information from any source they could get their hands on — voter registration, credit card transactions, product warranty information, donations to political campaigns and non-profits, court records — storing it in master databases and then analyzing it in all sorts of ways that could be useful to direct-mailing and telemarketing outfits. It wasn’t long before data brokers realized that this information could be used beyond telemarketing, and quickly evolved into a global for-profit intelligence business that serves every conceivable data and intelligence need.
Today, the industry churns somewhere around $200 billion in revenue annually. There are up to 4,000 data broker companies — some of the biggest are publicly traded — and together, they have detailed information on just about every adult in the western world.
No source of information is sacred: transaction records are bought in bulk from stores, retailers and merchants; magazine subscriptions are recorded; food and restaurant preferences are noted; public records and social networks are scoured and scraped. What kind of prescription drugs did you buy? What kind of books are you interested in? Are you a registered voter? To what non-profits do you donate? What movies do you watch? Political documentaries? Hunting reality TV shows?
That info is combined and kept up to date with address, payroll information, phone numbers, email accounts, social security numbers, vehicle registration and financial history. And all that is sliced, isolated, analyzed and mined for data about you and your habits in a million different ways.
The dossiers are not restricted to generic market segmenting categories like “Young Literati” or “Shotguns and Pickups” or “Kids & Cul-de-Sacs,” but often contain the most private and intimate details about a person’s life, all of it packaged and sold over and over again to anyone willing to pay.
Take MEDbase200, a boutique for-profit intel outfit that specializes in selling health-related consumer data. Well, until last week, the company offered its clients a list of rape victims (or “rape sufferers,” as the company calls them) at the low price of $79.00 per thousand. The company claims to have segmented this data set into hundreds of different categories, including stuff like the ailments they suffer, prescription drugs they take and their ethnicity:
These rape sufferers are family members who have reported, or have been identified as individuals affected by specific illnesses, conditions or ailments relating to rape. Medbase200 is the owner of this list. Select from families affected by over 500 different ailments, and/or who are consumers of over 200 different Rx medications. Lists can be further selected on the basis of lifestyle, ethnicity, geo, gender, and much more. Inquire today for more information.
MEDbase promptly took its “rape sufferers” list off line last week after its existence was revealed in a Senate investigation into the activities of the data-broker industry. The company pretended like the list was a huge mistake. A MEDbase rep tried convincing a Wall Street Journal reporter that its rape dossiers were just a “hypothetical list of health conditions/ailments.” The rep promised it was never sold to anyone. Yep, it was a big mistake. We can all rest easy now. Thankfully, MEDbase has hundreds of other similar dossier collections, hawking the most private and sensitive medical information.
For instance, if lists of rape victims aren’t your thing, MEDbase can sell dossiers on people suffering from anorexia, substance abuse, AIDS and HIV, Alzheimer’s Disease, Asperger Disorder, Attention Deficit Hyperactivity Disorder, Bedwetting (Enuresis), Binge Eating Disorder, Depression, Fetal Alcohol Syndrome, Genital Herpes, Genital Warts, Gonorrhea, Homelessness, Infertility, Syphilis… the list goes on and on and on and on.
Normally, such detailed health information would fall under federal law and could not be disclosed or sold without consent. But because these data harvesters rely on indirect sources of information instead of medical records, they’re able to sidestep regulations put in place to protect the privacy of people’s health data.
MEBbase isn’t the only company exploiting these loopholes. By the industry’s own estimates, there are something like 4,000 for-profit intel companies operating in the United States. Many of them sell information that would normally be restricted under federal law. They offer all sorts of targeted dossier collections on every population segments of our society, from the affluent to the extremely vulnerable:
- people with drug addictions
- detailed personal info on police officers and other government employees
- people with bad credit/bankruptcies
- minorities who’ve used payday loan services
- domestic violence shelter locations (normally these addresses would be shielded by law)
- elderly gamblers
If you want to see how this kind of profile data can be used to scam unsuspecting individuals, look no further than a Richard Guthrie, an Iowa retiree who had his life savings siphoned out of his bank account. Their weapon of choice: databases bought from large for-profit data brokers listing retirees who entered sweepstakes and bought lottery tickets.
Here’s a 2007 New York Times story describing the racket:
Mr. Guthrie, who lives in Iowa, had entered a few sweepstakes that caused his name to appear in a database advertised by infoUSA, one of the largest compilers of consumer information. InfoUSA sold his name, and data on scores of other elderly Americans, to known lawbreakers, regulators say.
InfoUSA advertised lists of “Elderly Opportunity Seekers,” 3.3 million older people “looking for ways to make money,” and “Suffering Seniors,” 4.7 million people with cancer or Alzheimer’s disease. “Oldies but Goodies” contained 500,000 gamblers over 55 years old, for 8.5 cents apiece. One list said: “These people are gullible. They want to believe that their luck can change.”
Data brokers argue that cases like Guthrie are an anomaly — a once-in-a-blue-moon tragedy in an industry that takes privacy and legal conduct seriously. But cases of identity thieves and sophistical con-rings obtaining data from for-profit intel businesses abound. Scammers are a lucrative source of revenue. Their money is just as good as anyone else’s. And some of the profile “products” offered by the industry seem tailored specifically to fraud use.
As Royal Canadian Mounted Police Sergeant Yves Leblanc told the New York Times: “Only one kind of customer wants to buy lists of seniors interested in lotteries and sweepstakes: criminals. If someone advertises a list by saying it contains gullible or elderly people, it’s like putting out a sign saying ‘Thieves welcome here.’”
So what is InfoUSA, exactly? What kind of company would create and sell lists customized for use by scammers and cons?
As it turns out, InfoUSA is not some fringe or shady outfit, but a hugely profitable politically connected company. InfoUSA was started by Vin Gupta in the 1970s as a basement operation hawking detailed lists of RV and mobile home dealers. The company quickly expanded into other areas and began providing business intel services to thousands of businesses. By 2000, the company raised more than $30 million in venture capital funding from major Silicon Valley venture capital firms.
By then, InfoUSA boasted of having information on 230 million consumers. A few years later, InfoUSA counted the biggest Valley companies as its clients, including Google, Yahoo, Microsoft and AOL. It got involved not only in raw data and dossiers, but moved into payroll and financial, conducted polling and opinion research, partnered with CNN, vetted employees and provided customized services for law enforcement and all sorts of federal and government agencies: processing government payments, helping states locate tax cheats and even administrating President Bill Clinton “Welfare to Work” program. Which is not surprising, as Vin Gupta is a major and close political supporter of Bill and Hillary Clinton.
In 2008, Gupta was sued by InfoUSA shareholders for inappropriately using corporate funds. Shareholders accused of Gupta of illegally funneling corporate money to fund an extravagant lifestyle and curry political favor. According to the Associated Press, the lawsuit questioned why Gupta used private corporate jets to fly the Clintons on personal and campaign trips, and why Gupta awarded Bill Clinton a $3.3 million consulting gig.
As a result of the scandal, InfoUSA was threatened with delisting from Nasdaq, Gupta was forced out and the company was snapped up for half a billion dollars by CCMP Capital Advisors, a major private equity firm spun off from JP Morgan in 2006. Today, InfoUSA continues to do business under the name Infogroup, and has nearly 4,000 employees working in nine countries.
As big as Infogroup is, there are dozens of other for-profit intelligence businesses that are even bigger: massive multi-national intel conglomerates with revenues in the billions of dollars. Some of them, like Lexis-Nexis and Experian, are well known, but mostly these are outfits that few Americans have heard of, with names like Epsilon, Altegrity and Acxiom.
These for-profit intel behemoths are involved in everything from debt collection to credit reports to consumer tracking to healthcare analysis, and provide all manner of tailored services to government and law enforcement around the world. For instance, Acxiom has done business with most major corporations, and boasts of intel on “500 million active consumers worldwide, with about 1,500 data points per person. That includes a majority of adults in the United States,” according to the New York Times.
This data is analyzed and sliced in increasingly sophisticated and intrusive ways to profile and predict behavior. Merchants are using it customize shopping experience— Target launched a program to figure out if a woman shopper was pregnant and when the baby would be born, “even if she didn’t want us to know.” Life insurance companies are experimenting with predictive consumer intel to estimate life expectancy and determine eligibility for life insurance policies. Meanwhile, health insurance companies are raking over this data in order to deny and challenge the medical claims of their policyholders.
Even more alarming, large employers are turning to for-profit intelligence to mine and monitor the lifestyles and habits of their workers outside the workplace. Earlier this year, the Wall Street Journal described how employers have partnered with health insurance companies to monitor workers for “health-adverse” behavior that could lead to higher medical expenses down the line:
Your company already knows whether you have been taking your meds, getting your teeth cleaned and going for regular medical checkups. Now some employers or their insurance companies are tracking what staffers eat, where they shop and how much weight they are putting on — and taking action to keep them in line.
But companies also have started scrutinizing employees’ other behavior more discreetly. Blue Cross and Blue Shield of North Carolina recently began buying spending data on more than 3 million people in its employer group plans. If someone, say, purchases plus-size clothing, the health plan could flag him for potential obesity — and then call or send mailings offering weight-loss solutions.
…”Everybody is using these databases to sell you stuff,” says Daryl Wansink, director of health economics for the Blue Cross unit. “We happen to be trying to sell you something that can get you healthier.”
“As an employer, I want you on that medication that you need to be on,” says Julie Stone, a HR expert at Towers Watson told the Wall Street Journal.
Companies might try to frame it as a health issue. I mean, what kind of asshole could be against employers caring about the wellbeing of their workers? But their ultimate concern has nothing to do with the employee health. It’s all about the brutal bottom line: keeping costs down.
An employer monitoring and controlling your activity outside of work? You don’t have to be union agitator to see the problems with this kind of mindset and where it could lead. Because there are lots of things that some employers might want to know about your personal life, and not only to “keep costs down.” It could be anything: to weed out people based on undesirable habits or discriminate against workers based on sexual orientation, regulation and political beliefs.
It’s not difficult to imagine that a large corporation facing a labor unrest or a unionization drive would be interested in proactively flagging potential troublemakers by pinpointing employees that might be sympathetic to the cause. But the technology and data is already here for wide and easy application: did a worker watch certain political documentaries, donate to environmental non-profits, join an animal rights Facebook group, tweet out support for Occupy Wall Street, subscribe to the Nation or Jacobin, buy Naomi Klein’s “Shock Doctrine”? Or maybe the worker simply rented one of Michael Moore’s films? Run your payroll through one of the massive consumer intel databases and look if there is any matchup. Bound to be plenty of unpleasant surprises for HR!
This has happened in the past, although in a cruder and more limited way. In the 1950s, for instance, some lefty intellectuals had their lefty newspapers and mags delivered to P.O. boxes instead of their home address, worrying that otherwise they’d get tagged as Commie symps. That might have worked in the past. But with the power of private intel companies, today there’s nowhere to hide.
FTC Commissioner Julie Brill has repeatedly voiced concern that unregulated data being amassed by for-profit intel companies would be used to discriminate and deny employment, and to determine consumer access to everything from credit to insurance to housing. “As Big Data algorithms become more accurate and powerful, consumers need to know a lot more about the ways in which their data is used,” she told the Wall Street Journal.
Pam Dixon, executive director of the Privacy World Forum, agrees. Dixon frequently testifies on Capitol Hill to warn about the growing danger to privacy and civil liberties posed by big data and for-profit intelligence. In Congressional testimony back in 2009, Dixon called this growing mountain of data the “modern permanent record” and explained that users of these new intel capabilities will inevitably expand to include not just marketers and law enforcement, but insurance companies, employers, landlords, schools, parents, scammers and stalkers. “The information – like credit reports – will be used to make basic decisions about the ability of individual to travel, participate in the economy, find opportunities, find places to live, purchase goods and services, and make judgments about the importance, worthiness, and interests of individuals.”
For the past year, Chairman John D. (Jay) Rockefeller IV has been conducting a Senate Commerce Committee investigation of the data broker industry and how it affects consumers. The committee finished its investigation last week without reaching any real conclusions, but issued a report warning about the dangers posed by the for-profit intel industry and the need for further action by lawmakers. The report noted with concern that many of these firms failed to cooperate with the investigation into their business practices:
Data brokers operate behind a veil of secrecy. Three of the largest companies – Acxiom, Experian, and Epsilon – to date have been similarly secretive with the Committee with respect to their practices, refusing to identify the specific sources of their data or the customers who purchase it. … The refusal by several major data broker companies to provide the Committee complete responses regarding data sources and customers only reinforces the aura of secrecy surrounding the industry.
Rockefeller’s investigation was an important first step breaking open this secretive industry, but it was missing one notable element. Despite its focus on companies that feed on people’s personal data, the investigation did not include Google or the other big Surveillance Valley data munchers. And that’s too bad. Because if anything, the investigation into data brokers only highlighted the danger posed by the consumer-facing data companies like Google, Facebook, Yahoo and Apple.
As intrusive as data brokers are, the level of detail in the information they compile on Americans pales to what can be vacuumed up by a company like Google. To compile their dossiers, traditional data brokers rely on mostly indirect intel: what people buy, where they vacation, what websites they visit. Google, on the other hand, has access to the raw uncensored contents of your inner life: personal emails, chats, the diary entries and medical records that we store in the cloud, our personal communication with doctors, lawyers, psychologists, friends. Data brokers know us through our spending habits. Google accesses the unfiltered details of our personal lives.
A recent study showed that Americans are overwhelmingly opposed to having their online activity tracked and analyzed. Seventy-three percent of people polled for the Pew Internet & American Life Project viewed the tracking of their search history as an invasion of privacy, while 68 percent were against targeted advertising, replying: “I don’t like having my online behavior tracked and analyzed.”
This isn’t news to companies like Google, which last year warned shareholders: “Privacy concerns relating to our technology could damage our reputation and deter current and potential users from using our products and services.”
Little wonder then that Google, and the rest of Surveillance Valley, is terrified that the conversation about surveillance could soon broaden to include not only government espionage, but for-profit spying as well.
[Image courtesy redjar]