Data is the new oil for online marketers – valuable but dangerous

At IBM Unica’s recent conference in Berlin a speaker from the loyalty card company Nectar started his presentation by saying “data is the new oil”. He told us we need to find it, extract it, refine it, distribute it, and monetise it. This is what Nectar does with its 22 billion rows of customer data. Yes, 22 billion rows.

Monetising data is mostly Marketing’s responsibility. Marketers use online data collected to profile prospective customers and target them with relevant offers they should find attractive. The holy grail for marketers is a ‘market segment of one’; ie being able to target an individual based on his / her demographic characteristics (e.g. age, sex, location etc), and past behaviour (e.g. buys Muller yogurts and bread together every Tuesday).

A segment of one means that a marketer should be able to anticipate what you will need and want next, and then promote and sell these products / services to you, while making a nice profit for their employers. Satisfying customer needs is the purpose of marketing after all, rather than spraying (spamming) everyone with all kind of irrelevant offers that interrupt and irritate. This is largely where web promotions have been to date. Sign up to Groupon and see what I mean.

But how do marketers find out all this personal data about you? Cookies. Every time you visit a sophisticated web site they plonk a cookie onto your PC’s hard disk. I have c. 500 on my PC today, and I only bought my PC three months ago. If you don’t delete them using a browser setting or a security product like Norton, you might have 1000s of cookies waiting there quietly until you visit a company’s web site or click on one of their promotional emails, for example.

Then the cookie springs into life and starts directing and dictating what you see next and the ‘next best action’ for you. The cookie takes you on an optimised web site conversion path i.e. you are being monetised. Many cookies make your user experience much more enjoyable and efficient, as they re-connect you with products viewed in your previous web site visit, and can feed you highly relevant and useful information. Delete them all, and you delete the good with the bad, and the baby goes out with the bathwater.

But not everyone thinks that cookies are such a fine thing. A new EU law came into play in May 2011 requiring that cookies can only be stored on PCs if users provide “explicit consent”. If this law was to be rigorously policed, it would blow a huge hole in the activities of the online marketing industry. However, the Information Commissioners’ Office has obliging left a nice big loophole. If a cookie is “strictly necessary” for a service requested by the user, consent is not needed. Online Marketers will also point to precedent of the toothless Data Protection Act (1998) that was never effectively enforced. Nevertheless, compliance to the new cookie act is required, and all those using cookies (i.e. virtually all medium and large companies) need to consider their position.

Another unwelcome distraction for the online marketer is Eli Pariser’s new book ‘The Filter Bubble: what the Internet is hiding from you’. Pariser claims that Google, Facebook, the Huffington Post, the New York Times, Yahoo! News and many other web companies are personalising the news and other data they send to you, based on your previous behaviour and of course, without asking you.

This means you are no longer gaining balanced news, but rather biased news supporting your preferences. He says you might be receiving only ‘dinner desert’ information (short term, ‘feel good’ information) and no meat and potatoes (i.e. you are being denied ‘real’ content that is good for you). The same criticism might be levelled at the information that online marketers’ cookies push you to.

Oil, as we know, makes the world go around. The BP oil spill in the Gulf of Mexico highlights what can go wrong if the necessary checks and balances are ignored. Data is in the same place. Some claim that data is now the most important asset any business has.

The data industry as a whole, both vendors and customers, and not only online marketers, has an obligation to self-regulate. Good data governance and data privacy practices need to be promoted now, in real time, to ensure the continued growth of the industry. The slow mechanisms of country, regional and international law makers will be unable to keep pace with the data industry’s remarkable rate of change, and will always be one step behind.