Data Brokering: Advantages and Disadvantages

This page explores the advantages and disadvantages of data brokering as practiced by data brokers. It covers the benefits and drawbacks associated with this industry and also touches on the characteristics of the data broker industry itself.

What is Data Brokering?

Introduction: Data brokering is the process of collecting individuals’ personal information and selling it to other organizations without their knowledge.

The individuals or groups involved in data brokering are known as data brokers or information brokers. The personal information gathered includes details such as:

• Name
• Age
• Race
• Gender
• Height
• Weight
• Marital status
• Religious and professional affiliations
• Qualification
• Occupation
• Income
• Housing situation (own/rent)
• Investment details
• Hobbies
• Health information
• Other interests

Data brokers use algorithms or software to create profiles of individuals based on this data.

Sources of Data Collection

Data brokers collect information from a variety of sources, including:

• Public records
• Private sources such as census data, change of address databases, motor vehicle registration records
• Social networking sites (e.g., Facebook, Twitter, LinkedIn, YouTube, Google+)
• Media/Court reports
• Voter lists
• Online purchase history
• Transaction records with banks
• Cellular companies (e.g., Vodafone, Verizon, AT&T, T-Mobile)
• Healthcare companies and hospitals
• Web browsing histories on major search engines (e.g., Google, Yahoo, Bing)

Buyers of Data

The personal data collected by data brokers is sold to various organizations, including:

• Advertising and marketing agencies
• Banks (to assist with loan or credit card issuance based on an individual’s profile)
• Research organizations conducting studies on individuals
• Government agencies (e.g., FBI, CIA)
• Law enforcement agencies (e.g., ATF, DEA)

Characteristics of the Data Broker Industry

• Data brokers collect consumer data from diverse sources without consumers’ consent or awareness.
• The data broker industry is complex, with multiple layers of brokers exchanging data.
• Data brokers collect and store billions of data points, covering nearly every consumer.
• Data brokers combine and analyze data to make inferences about consumers, including potentially sensitive conclusions.
• Data brokers combine online and offline data to target consumers with online marketing.

Benefits or Advantages of Data Brokering

Consumers can benefit from some of the ways data brokers collect and use data. Here are some advantages:

• Data brokering can help prevent fraud, improve product offerings, and deliver more relevant advertisements.
• Risk mitigation products can protect consumers by preventing fraudsters from impersonating them.
• Marketing products can help consumers find goods and services they prefer at affordable prices.
• Consumers benefit from increased and innovative product offerings from various companies, including small businesses.
• People search products can allow individuals to reconnect with old friends, classmates, or neighbors.

Drawbacks or Disadvantages of Data Brokering

Many of the purposes for which data brokers collect and use data pose risks to consumers. These are some disadvantages:

• Errors in risk mitigation products can deprive consumers of immediate benefits, and they may have limited recourse to prevent recurrence.
• Scoring processes in some marketing products are not transparent to consumers, making it difficult to mitigate the negative effects of low scores (e.g., limited advertisements, varying levels of service).
• Advertisements related to health or financial products can be intrusive and erode consumer trust.
• People search products can be used for malicious purposes, potentially exposing domestic violence victims, prosecutors, and law enforcement officers to harm.
• Storing consumer data indefinitely creates security risks, as identity thieves may use historical habits to predict passwords and other authentication credentials.