How THEY use your data to make money
TL;DR: Personal data, often called digital gold, is incredibly valuable and has become a major revenue source for many companies, especially tech giants like Meta, Google, and Amazon. These companies mainly use personal data for targeted advertising, which allows them to charge higher fees for more effective ads. However, other businesses and industries, such as data brokers and healthcare, also find creative ways to monetise personal data. While the use of personal data can provide benefits like better user experiences and personalised healthcare, it raises concerns about privacy violations, the potential misuse of information, and the concentration of power in a few companies. To ensure the responsible and sustainable use of personal data, individuals, companies, and governments must work together to establish transparent regulations and guidelines.
Digital gold — really?
Personal data is sometimes touted as digital gold; these back-of-the-envelope calculations suggest that data is even more valuable than gold. Even organisations like KPMG and IBM liken data to gold. Yet others sharply object to blanket claims that data is the new gold or oil. But opposing arguments often reflect different perspectives. Cybersecurity and data privacy organisations appreciate the legislated need to protect data like gold. Applied statisticians and data scientists know that data is messy and must be cleaned and expertly analysed before being likened to something precious. And social media giants show us that personal data’s value appreciates exponentially with the size of the user base.
Despite different contexts, there is no debate that collecting, processing, leveraging, and even “selling” personal data is big business. One company effectively leveraging personal data for financial gain is Meta, with a gross profit of $91.36 billion in 2022, equating to Meta profiting more than $250 million daily (in gross profit, on average). So call it how you like, but data, especially your personal data, is valuable.
https://youtube.com/shorts/kBlf7ySXDao?si=AtbDJwzul9-WkNEo
How it works?
Companies make billions by monetising your data in different ways, such as targeted advertising (in the case of Meta and Google, for example). By using personal data to profile individuals, companies serve tailored advertisements based on users’ interests and needs. This kind of advertising is more effective and allows companies to charge higher fees for targeted advertisements. Meta and Google collect data on our search history, location, and other online habits to determine our interests and needs; that is why, for example, you start seeing ads for things you happened to search for recently. Here is a video explaining how Google uses your data and another describing how Meta uses your data.
https://youtube.com/shorts/MCKKWHNCB2A?si=sRcKFOmqYgiVZt0F
Tech giants simply cannot operate effectively without leveraging our personal data. More than 99% of Meta’s revenue in 2022 came from advertising. And in the last quarter of 2022, more than 77% of Google’s total revenue came from advertising on Google’s search engine (56%), YouTube (10%), and Google’s other websites and apps (11%) where it delivers targeted ads.
You probably already know how Meta and Google use personal data to dominate online advertising. But your personal data is used by many other businesses in increasingly creative ways. We briefly look at three examples below:
1. Amazon
Amazon shares similarities to Meta and Google, so we don’t need to repeat the story. Interestingly though, while Amazon’s current business model (in part) relies on user data to serve up the items you are most likely to purchase, Amazon used data in its early days to learn how to be an effective online seller. This article notes how Amazon sold books at near cost to increase sales and gather customer data, which it then used to learn how to “sell everything else online”.
https://youtube.com/shorts/RTeEr5aqBsA?si=K1_AH6I3RQY27XxU
Companies evidently rely on our personal data to become and remain competitive. This article presents a stunning account of the depth and breadth of Amazon’s “data collection” efforts, noting how “(t)he company gathers customer information as they navigate the site, use Amazon services (like Prime Video) and Amazon devices (such as Kindle), browse other Amazon owned sites (including Goodreads, WholeFoods, and Zappos), and interact with Alexa”. Across these platforms, Amazon literally knows (among other things) your IP address, location, timezone, search queries, clicks, browsing time, product reviews, shipping address, viewing and musical preferences, voice commands, grocery list (!), and even your reading preferences to the extent that Amazon knows which parts of the books you read are of most interest to you. See this article for more detail and a jarring account of how tech companies know us better than we know ourselves. In short, these companies use artificial intelligence to analyse more data than the human mind can process, so claiming that tech companies know us better than we know ourselves is not a rant at all, but rather a fair argument in certain contexts.
By using our personal data to profile us in shocking and amazing ways, Amazon gives us a better user experience, prompting us to continue supporting Amazon. But we individuals are not Amazon’s only customers. Amazon also offers services to businesses and organisations that rely on data, such as data storage, analysis, and management. By leveraging its vast data resources, Amazon can provide valuable insights to these clients, which they can use to make informed business decisions. This generates revenue for Amazon through service fees and subscriptions.
2. Data brokers
You may have noticed that we did not speak about the sale of personal data. As far as we know, companies like Amazon, Google and Meta do not sell our personal data (notwithstanding some massive “blunders” like the Cambridge Analytica scandal, to put it lightly).
But selling personal data is another way companies profit from our personal information. Data brokers specialise in buying, processing, and selling personal data. These companies often collect data from numerous sources, including online forms, mobile apps, and social media platforms, and then package and sell the data to other companies for use in targeted advertising, credit scoring, and other applications. The sale of personal data can be lucrative, with data brokers often charging significant fees for access to large datasets.
It turns out that data brokers actively harvest public information, even when we don’t realise that our personal data is up for grabs in the public domain. This video exposes how data brokers collect personal information from social media, property records, land registries, birth records, court records, voter registration records, bankruptcy records, and even other companies willing to sell your personal data.
The data broker industry is highly opaque and complex, sometimes bordering on illegality. In this article, the author provides a useful categorisation of data brokers, with data brokers falling into the following categories based on the type of products they offer: financial information, risk mitigation, marketing and advertising, people search, and personal health. Evidently, data brokers come in different flavours, adding to the complexity of this lesser-known industry.
When it comes to data brokers, there is an interesting juxtaposition to be drawn between them and tech firms like Amazon, Google and Meta. While we are investigating how companies make money by using personal information, it is interesting to look at how much companies are willing to spend on protecting their use of personal information (so that they can continue operating as usual). In this excellent bit of investigative journalism, The Markup found that about 25 data broker companies spent $29 million on federal lobbying in 2020. This is more than what the major tech titans, Meta ($19.7 million), Amazon ($18.7 million) and Google ($8.9 million), spent individually that year. This comparison is an interesting indication of how lucrative the lesser-known data broking industry is; incumbents are fighting hard to maintain their role.
3. Data Commercialisation in the South African Health Care Context
This article has thus far taken a global view, with most examples coming from the United States. But the use of personal data spans geographical boundaries. Our examples also mostly covered online publicly available data sources, but the use of personal data spans data sources and contexts.
In South Africa, the use of personal data extends beyond the online sphere and into the healthcare sector. Botes et al. (2020) examine the commercialisation of genetics and genomics data in South Africa. The article highlights that genetics and genomics data can be valuable for research purposes, drug development, and personalised medicine, among other applications.
One example of data commercialisation in the South African healthcare context is the partnership between the South African National Bioinformatics Institute (SANBI) and pharmaceutical companies. SANBI collaborates with these companies to develop new drugs and therapies based on genetic information from South African patients. By leveraging the unique genetic diversity of the South African population, these partnerships aim to create tailored medical treatments that are more effective for specific patient groups.
While incredible value is unlocked from a clinical perspective, pharmaceutical companies, research institutions, and biotechnology firms also benefit financially by using these data to develop new drugs, medical treatments, and diagnostic tools tailored to individuals’ genetic makeup. This personalisation of healthcare can lead to more effective treatments and better health outcomes, resulting in significant commercial potential.
However, the commercialisation of genetics and genomics data raises various ethical and legal concerns, such as the ownership of the data, the consent of individuals whose data is being used, and potential discrimination based on genetic information. In South Africa, there is a need to address these issues and establish guidelines and regulations to ensure the responsible and ethical use of genetics and genomics data in healthcare and research.
What does this all mean?
One of the main implications of the use of personal data to make money is the potential for privacy violations. Personal data is sometimes collected without the people’s knowledge or consent, and the information can be used for purposes that a person may not have intended. For example, personal data may be used to target advertisements for products or services that the individual is not interested in, or to make decisions about creditworthiness that may not accurately reflect the individual’s financial situation. This can result in people being subjected to unwanted marketing or being unfairly denied access to credit.
In addition to privacy violations, the use of personal data for financial benefit can also have significant implications for companies and society as a whole. Companies that engage in the collection, processing, and sale of personal data face the risk of data breaches, which can result in the loss or theft of sensitive information. This can have a negative impact on the company’s reputation and lead to financial losses, as well as damage to the trust that individuals have in the company. Society as a whole is also affected by the use of personal data to make money. The growing use of personal data in advertising, credit scoring, and other applications has resulted in a concentration of power in the hands of a few companies. These companies often have significant influence over the flow of information and can use this power to manipulate individuals and markets for their own gain. This concentration of power can result in a lack of competition and innovation, as well as a reduction in consumer choice.
To sum up, personal data has become one of the most valuable commodities in the digital age, with companies making billions of dollars by monetising individuals’ personal information. While the use of personal data to make money has many benefits, including more effective advertising and improved credit scoring, it also has significant implications for privacy, companies, and society as a whole. To ensure that the use of personal data is responsible and sustainable, it is important for individuals, companies, and governments to work together to establish clear and transparent regulations and guidelines.
