What are Data Brokers and How they Work?

Well, do you know that there are companies that can hold up to 1500 pieces of information about a person? These are known as Data Brokers or Information Brokers.

It would not be an exaggeration to say that such companies hold more information about people than state authorities.

Although data-privacy is a sensitive issue, there are companies that operate away from the spotlight and skew the interpretation of “legitimate interest” to exploit the inattention of internet users who don’t read or understand what they consent to.

This post offers detailed information about data brokers and how does it work. So, let us dive and explore the murky world of Information Brokers.

What is a Data Broker?

A data broker who is also called as information broker or information reseller can be understood as a business that goes on to collect personal information about consumers and then sells that information to other companies.

These data brokers refer themselves as being database marketers and even consumer data analytics firms.

These information brokers collect and compile information about consumers using a variety of public and even non-public sources such as courthouse records, website cookies as well as loyalty card programs.

They create profiles of individuals typically for marketing purposes. They then sell this information of individuals to businesses that want to target their online advertisements and special offers based on this information.

Currently, there is no such legislation that requires these data brokers to share this gathered information with the consumers they have profiled.

Most people do not know that data brokers exist. Moreover, data brokerage has become a throbbing industry that is generating about $200 billion in revenues yearly.

Each internet activity leaves certain traces when people purchase things online, search on Google, like a Facebook page, or even create a profile on a dating website.

The data brokerage firms or data brokers get hold of this mountain of data and exchange or sell this information with third parties such as companies, individuals or even other data brokers for whom this information may prove very valuable.

Is Data Broking Legal?

In most of the regions across the world, data brokers operate on the brink of the law. However, that’s not the case always. There are countries (such as the USA) where these data brokers operate in full accordance with the law. In these countries, data policies are not very strict or diligently enforced.

In many situations, users give their consent to share their data with third-party brokers. It is included as one of the checkboxes when registering on a site or filling out a form where you need to key in your personal details for getting a loyalty card.

As of now, most people are not comfortable with someone selling their data. However, some people that go on to participate in special data brokerage programs such as Luth Research, where one can get paid for sharing their personal details and interests with third parties.

The motive is to allow companies to target you in their ad campaigns. So, in theory, data brokerage turns out to be a win-win situation for both data brokers as well as for consumers.

The current trends in data-brokerage model

As of now, data protection and privacy laws have been much tightened around the world, bringing new challenges to the data brokering model.

For example, as per the European Union’s General Data Protection Regulation (GDPR), for processing a person’s data, one of the six legal bases with respect to data processing must apply.

One such base is “legitimate interest,” which is highly vague and probably the most abused and misinterpreted legal basis.

So, most data brokers rely on legitimate interest as their legal base for processing user data.

However, we must clarify that legitimate interest does not apply to advertise. It means that data brokers & AdTech companies must obtain explicit consent for collecting and processing user data.

Data brokers maintain that derived, predicted, and inferred data are not examples of personal data. They use these set of data for targeting users via unique identifiers. All in all, it’s hard to erase things permanently on the Internet. So, some copy of your data will always exist somewhere.

What are the types of Information Broker?

There are thousands of companies that collect information about consumers from public and non-public sources and sell them to other companies.

Information Brokers are broadly divided into three categories based on the range and type of data they store:

Advertising Data Brokers

Some data brokers focus on marketing. For example, Acxiom and Datalogix. These companies create databases of individuals and use it for targeted advertising and marketing. The data set includes a person’s age, location, education level, web history, and income, interests, as well as purchase history.

Advertising companies purchase these data sets of audiences from data brokers and show them targeted ads.

Risk-Mitigation Data Brokers

These data brokers go on to use a person’s search history to offer them high-risk (high interest) loans. For example, a person having a modest income and making regular online purchases with the credit card indicates that such a person has a lot of debt.

Fraud Detection Data Brokers

These data brokers offer fraud detection. They offer services to banks as well as mobile phone operators. For example, a bank might take the services of these information brokers before granting a loan to a person for determining whether the information provided is correct and legitimate. This is done to reduce the risk of granting a loan to a fraudster.

People-Search Sites

There are people-search sites like PeekYou and Spokeo that allow companies to get information about a person. They can search with their name, phone number(s), address, email, and social security number.

The information provided includes:

  • Aliases
  • Address (past & present)
  • Birthdate
  • Education details
  • Interests
  • Employment details
  • Marital status
  • Financial information
  • Social media information (profiles)

This information is easily and readily available with people-search sites.

What are the types of data collected by data brokers?

Data brokers go on to collect information using a range of online and offline sources such as:

  • Social media
  • Web history
  • Credit Card Information
  • Online & Offline Purchase History
  • Government Records such as driving license, census data, birth certificates, voter-registration, marriage licenses, etc.

The following is the list of data that is collected and sold by data brokers:

  • Full name
  • Residence Address
  • Telephone Numbers
  • Age
  • Gender
  • Email Addresses
  • Social Security Number
  • Real estate data
  • Income
  • Education
  • Occupation

Information brokers use these pieces of information and create audience segments which are then sold to organizations. This information is used by many Tech companies for improving targeting.

How Information Broker Make Money?

Data brokers may use various business models. However, at the most basic level, data brokerage is about sourcing and aggregating data and then reselling it to the third parties.

The audience segments are sold to AdTech companies on a cost per mille (CPM) basis, or even as a percentage of media. information brokers focus on common categories such as “music lover,” “impulse buyer,” “sports enthusiast,” etc.

How do Data Brokers Work?

Although there is much apprehension about data brokers’ method of sourcing the data, it is not necessary that data brokers collect the data illegally.

Most of the data brokers search the internet and look for publicly available information about users from sources such as social media sites. They also go on to receive the data from companies that have collected the data themselves.

So, data brokers source the data from data providers and offer it to data consumers. In most of the cases, information brokers collect data from sources such as:

  • Free games and apps
  • Registered loyalty cards
  • Purchase history
  • Public social media profiles
  • Publicly available information

How does Information Broker get Data?

Information Brokers get your data from public records, including property records, motor vehicle records, driver’s license, court records, census data, marriage licenses, divorce records, birth certificates, voter registration information, state professional records, recreational license records, bankruptcy records, etc.

They even buy information from commercial sources. They dive and look out for people purchase histories collecting data such as dates, dollar amount, payments used, coupons used, loyalty cards, etc. Information Brokers also derive information from warranty registration from retailers as well as catalog companies.

Other sources from where Information Brokers collect information include:

  • Social media sites
  • Web browsing activity
  • Quiz Apps
  • Media Reports
  • Websites
  • Publicly available sources

They even exchange or purchase information from one another. After that, they merge the data with their records.

How much is the data broker industry worth?

As it stands now, the consumer data is worth a lot of money. For example, the average email address is worth $89.00. So, data brokers are willing to pay for that kind of data. Moreover, the data broker industry is worth billions of dollar. In 2012 alone, the data broker industry created $150 billion in revenue. As of now, the data broker industry is worth $200 billion.

Plus, it is showing no signs of getting less profitable. Many Information Brokers are paying consumers for accessing their social media accounts and credit card transaction data. For example, Luth Research is paying consumers up to $100/mo for participating in surveys and digital tracking.

Can you opt-out?

Some people search sites allow people the opportunity to opt-out. However, in most cases, these processes are automated. They can even get your data back on their system.

Moreover, opting out proves difficult and complicated. There are only a few sites that offer a simple and transparent opt-out method.

Some sites allow you to hide some of the information but not all of it. You can even subscribe to services such as DeleteMe that gives this type of protection. Some data brokers allow removal requests.

Moreover, in most of the cases, opting out is free. However, most people are not aware that such options exist. In some cases, it may happen that information brokers do not show up all the data that they have collected about a consumer or a user.

That said this is not the case with all the data brokers. So, some information brokers do show all the data that they have collected about a user.

For example, About the Data is a website by concerning that offers to show the data points that the company has collected about a user. Moreover, it even allows them to update incorrect data.

Most importantly, data brokers may not consider the inferences that are made using the data itself. Last but not the least; it’s really difficult to erase things permanently over the Internet. So, some copy of your data will always exist somewhere.

Concluding

Data brokerage has come under strict scrutiny ever since GDPR came into effect in 2018. So, data brokers must act carefully if they do not wish to face data-breach investigations.

Moreover, they have to end up paying heavy fines if they do not follow GDPR guidelines. For instance, Google was recently fined $57 million in France for violating EU’s data-protection rules by data regulator known as CNIL.

However, this does not mean that users are completely safe with their data on the Internet. So, from consumers standpoint, it’s a must that they should not share their data with suspicious websites.

They need to read the consent forms thoroughly before submitting any of their data. They also need to be cautious while using free services over the Internet. Lastly, from data brokers’ point of view, they need to more careful in their practices.

We hope that the post has given much insight into information brokers and how it works. We have offered much detailed so that you can thoroughly understand and know what data brokers are.

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