Data Regulation: What Could Go Wrong?

PortalProbsQuestions lingered after the Federal Trade Commission (FTC) presented to the data marketing space a 100-plus-page push for greater transparency Tuesday.

The FTC’s manifesto, “Data Brokers: A Call for Transparency and Accountability,” sparked debate about what a data broker is and the potential pitfalls for a proposed centralized portal through which consumers can control the dissemination of their personal data.

According to the FTC, a data broker is a company whose primary business is the collection and sharing of consumer information from a variety of sources for the purpose of marketing, identity verification or fraud detection. Data brokers do not have direct relationships with consumers.

But even the parameters of a “direct relationship” can be rife with loopholes. Facebook, for instance, has a direct relationship with a consumer (who signs up willingly for a social account, providing information like birthdate, place of residence and marital status) but partners closely with one of the FTC’s nine identified “data brokers,” offline-online linking company Datalogix.

“I think if they’re trying to talk about the gathering of data and then the reselling of that data as a data brokering business, it’s a very broad definition that unfortunately can be overreached from a regulatory perspective,” said Ray Wang, chairman and principal analyst of Constellation Research. “From a consumer perception perspective, it probably is the broadest sense of the definition.”

By grouping marketing, people search and public record data providers under the “data broker” umbrella, some industry insiders believe the FTC is doing the marketing space a disservice.

“Terms like ‘big data’ should not apply exclusively to personal data (or marketing data),” said Daniel Castro, senior analyst for the Information Technology & Innovation Foundation and director of the Center for Data Innovation. “There are vast amounts of data about industrial equipment, machinery, aircraft, etc., that are exchanged between parties. I prefer the terms ‘data user’ and ‘data sharer’ to reflect these two important roles in the data economy.”

Whether that data is sold for profit or shared freely is “kind of irrelevant,” he said.

One of the benefits of big data is the promise it presents to extract something meaningful, Castro said. “Data quality can be measured on at least three metrics – accuracy, precision and confidence. So there is a lot of data about individuals that may be imprecise or only correct 80% of the time, but still has value.”

The FTC also proposed the creation of a centralized opt-out portal, but it’s unclear which entity – government, data broker, or third-party contractor – should oversee this effort.

“These portals present a security risk,” Castro said. “If policymakers are worried about privacy, they shouldn’t be demanding that data brokers put all of (a) consumer’s information on the Internet.”

Rick Erwin, president of Experian Marketing Service’s targeting division, agreed.

“We don’t think it’s a good idea,” he said. “Why not build this massive infrastructure of complex, co-mingled data? Because it’s a hacker’s dream. … What we do think is a good idea is continuing to provide consumers with easy, transparent, accessible notice and choice.”

Wang added: “I think the public trust, given what’s happened with, and [the government’s] ability to protect privacy, at this point, is pretty low. The challenge for policymakers is the use cases they’re trying to build policies [around] are static when the [data] business is actually moving very fast. I think, whatever they decide data brokers [will use] should probably be applied internally, as well.”


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