Buying consumer data? Tread carefully.

Collecting and selling data about people is estimated to be a $200 billion business, and all signs point to continued growth of the data-brokerage business. Here’s how the business works when the data is being sold to consumer marketers. Data brokers collect information about customers wherever they can: through loyalty cards, public records, social media posts, and most often by tracking their browsing behavior across different websites. All this tracked customer information is then fed to machine-learning algorithms, which build segmented profiles of similar groups of people. These digital profiles are then packaged as “audiences”; typical groupings might be “fashion interested” or “males 25-54.” Marketers can buy these off-the-shelf audiences from data brokers for ad targeting. For example, Nike or Adidas might buy access to the audience segment “fashion interested” to communicate with prospective sneakers buyers. Read more…