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
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.
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