Is it really that valuable? How much are these companies shelling out to purchase said data from other companies?
And what data are they typically selling/buying?
I’m a fairly boring person. I just can’t wrap my head around some company wanting to pay for information about who I am, what I like, etc.
Curious if anyone can share more information on this business model/practice.
In: Economics
> Is it really that valuable?
Yes.
> How much are these companies shelling out to purchase said data from other companies?
Not much on a per unit basis, but when you’re buying millions of people’s data those numbers add up.
> I’m a fairly boring person. I just can’t wrap my head around some company wanting to pay for information about who I am, what I like, etc.
You and everyone else is incredibly boring. Virtually everyone is boring. BUT that isn’t what the companies buying this data care about. What they care about is “how do I get you to spend money on my product”. Understanding what you like, dislike, watch, eat, drink etc. allows companies to put you into a category of people like you and then target you with content/material/products that resonate specifically with you.
Typically, companies will purchase data in order to market their products or services to purchased lists of people. They will buy your name, phone number, email address, mailing address, occupation, and demographic information to learn more about what services or products you might purchase and then they send you targeted ads via email, phone, etc. Buying purchased contact lists and sending unsolicited emails to them is technically illegal, but there are some loopholes companies use to tip toe the line of legality.
Companies will acquire contacts and then sell them to other companies. These contacts can be acquired legally by a company, like when you purchase a product and willfully provide your info, or illegally like when they’re “scraped” from the internet using a program. Companies will pay anywhere from a few cents to a dollar or two per contact.
Edit: additional info
What is the goal of a business?
That’s right, to sell a service or a product to you.
But first they need to find customers, determine you are a potential customer, convince you to become an actual customer, retain thr customer, etc.
This requires information about people. Who they are what they like, etc.
Say you go on Amazon for example and buy a few bean bag chairs. With that data, a company might start giving you ads for maybe room decor, or other furniture for your house. Maybe you buy a dog bed, they now know you would be someone to buy dog treats, or dog toys, or something like that. With the info, that can show you things your more likely to buy, causing you to be more likely to spend money
Imagine you started a business selling baby strollers. Things are going OK, but you want to scale up, so you decide to commit $5000 to running some ads. Let’s pretend it’s like 2010.
You have a few choices. You can put an ad in the paper, but most paper ads go unread. And anyway they’re read by a lot of people without babies. All those ads not read by those shopping for baby products are wasted money. Maybe your $5000 gets you 2 new customers. That’s nice, but it doesn’t even cover your ad fee. Or (in the olden days) you buy a Google ad, but it’s just served to people at random. Maybe you buy 20,000 impressions of your ad, meaning it’ll be shown to 20,000 people. But again, the vast majority won’t be looking for baby stuff. Maybe you get 5 customers this way. Not bad, but you could do better.
So you go to a newfangled internet company and set up an ad account. Now it lets you fine-tune the demographic you want to actually serve ads to so you don’t waste money showing it to people who wouldn’t be clients anyway. So you set up your ad and start filtering:
* Ages 22-40: People older and younger than this aren’t usually having babies. Sure there are some 18-22 year olds, but they probably can’t afford your fancy stroller anyway.
* Women: Men buy baby stuff too, but you probably want to focus on the most common consumer base.
* People who have searched for other baby products recently: If someone’s been shopping for baby stuff for a few weeks, chances are they probably have – or are about to have – a baby.
* US only: You don’t really want to deal with international shipping, so you restrict the ad to only those based in the US.
* People in higher income brackets: Nothing against those who aren’t, but chances are someone more well-off will be more likely to buy your luxury stroller.
If you can serve your ad only to people that meet *all* of those criteria, you’re much more likely to get a hit. Maybe now your ad gets you 100 new customers instead of 2.
Now say the company actually charged $10k for this service instead of $5k like the paper does. Would you pay double to get 50x as many customers through focused ad targeting? Of course you would!
That’s basically how it works. And nowadays you can get a lot more granular than this. You can target your RGB Mountain Dew Mousepad only to 18-25 year old male gamers who have a penchant for RGB lighting.
The service is worth a lot, hence why they get paid so much. Because it works. Nowadays there’s something of a pushback against such broad data collection and invasive advertising in every minute corner of our lives, but the concept is the same.
You’re right that information on boring people doesn’t help anyone make any money.
Data-buying companies aren’t looking for people like you. They are looking for the indicators of people with gambling / medication addiction and low impulse control. _These_ people are the diamonds-in-the-rough that it’s worth sifting through 10,000 boring conscientious people to find.
The most common way is actually by *using* your data to decide which ads to show you. They may only get a fraction of a penny per targeted ad, but doing it to 100 million people a day dozens of times a day, it adds up.
Selling raw user data, even if it’s millions of people’s, isn’t very valuable, because that would require the data buyer to also have a means to exploit that data.
First, to clear up a very common misconception, the vast majority of the time, your data isn’t being collected and directly resold. That data is super valuable to the company, and they don’t want it getting into the hands of their competitors. Instead, those companies create other products and services that make use of that data in a way other people want to pay money for, best example being serving ads.
When you want to advertise your product, you don’t go to an ad network and purchase a bunch of data. You sign up for their service and part of that service includes having your ads targeted to certain groups of people. The ad company provides a list of all the ways it can target ads and the advertiser simply chooses from that list. It’s far more profitable to the ad network to have advertisers coming back every month to spend their advertising budgets than it is to directly sell the data they use to target the ads.
In cases where data is directly sold, it is typically sold in aggregated forms and stripped of any personally identifiable information. The biggest consumer of this, from what I’ve seen, is Universities and other research focused institutions who want to use the data for research.
Your data alone is pretty worthless. Data in large quantities becomes increasingly more valuable because it starts to form useful patterns and correlations that can be used for more interesting things. If I try to market my product solely to you, my chances of making a sale are probably very slim. But, if I market my product to a million people who are fairly similar to you, the chances that some of you will want to make a purchase are significantly increased.
As for the the types of data typically collected/used, I’d say the biggest tend to be things like gender, geographical location, income level, and product categories you might be interested in. A lot of this data gets inferred from the types of websites you visit, things you’ve previously bought, keywords that you’ve searched for, etc.
tldr; The business model works because large amounts of data is valuable and people are willing to pay for services with access to it, but any single piece of that data set is not valuable by itself.
Latest Answers