Where your personal data goes when you're not looking

There's a lot of consumer data floating around, but in many businesses it's still fairly disorganized.

What businesses know about any given individual is a lot. But what are companies doing with that data? Not as much as you might think -- at least not yet. Companies are getting more sophisticated, however.

The trove of data that's out there includes:

  • Traditional offline data gathered by credit bureaus and data aggregators, including public data from telephone directories, court and property records
  • User account data collected and retained by businesses with which consumers have purchased products or registered for services
  • Data from online activity including searches, social media profiles and tweets, mobile app activity and Web browsing habits

Add to that relatively new data types, such as that from "scoring" methodologies (PDF) that use data about people to predict their future behavior. Other new data types include:

  • Data from fitness devices and other "Internet of things"
  • Emerging retail store tracking systems that may soon identify you through face recognition as well as monitor your location as you move through a store
  • Location data from your smartphone that lets apps track where you are, how fast you're moving -- even the direction in which you're heading and where you're likely to be going given your previous travel history

It's no surprise, then, that people worry about what businesses are doing with all that information. (For more about how to protect yourself, see: "The paranoid's survival guide, part 1.")

More often than not, however, the answer is that businesses aren't doing as much as they could be. Enterprises face regulatory and technical hurdles that make combining the data they have difficult; some data types and uses of consumer data are highly regulated; and companies usually don't like to share core customer data externally for competitive reasons. When they do, that data is usually boiled down to basic demographic and interest categories and then aggregated for marketing purposes. If the data is being shared with third parties for the purpose of online advertising, personally identifiable information is usually removed. (See related story.)

Too many silos

Most businesses can't even integrate all of the data silos they have cost effectively, much less run sophisticated analytics across all of it or accommodate new data sources, such as the unstructured data streams derived from social media.

In the online advertising world, the behavioral advertising industry has developed a high level of sophistication and expertise, but most of corporate America -- including the manufacturing and consumer products sectors -- remains in the early stages of data integration, says Jim Adler, vice president and chief privacy officer at Metanautix, a firm that specializes data integration within and across companies. "They're still trying to understand what they have" and the data flows for all of it, he says.

Data privacy
Data privacy issues can only get more complicated from here, experts agree. REUTERS/Pawel Kopczynski

As those repositories of consumer data continue to slowly, steadily converge, however, the ways in which businesses interact with consumers will need to change if they are to head off the kinds of consumer privacy and trust headaches that have already confronted traditional data aggregators and the online behavioral advertising industry.

"Transparency overall will need to increase as these environments become more complex and intertwined," says Leigh Feldman, chief privacy officer at American Express Co. The financial and travel services company now has privacy professionals aligned with each business unit. "Privacy will be a competitive differentiator for companies over the next five years," he says. And in addition to offering transparency so users understand what's happening with their data, Feldman says it's important to present meaningful choices that let the user decide how their data can be used, and to guarantee customers that their data will be handled in a responsible fashion.

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