Frenemies: The Epic Disruption of the Ad Business (and Everything Else) (18 page)

“The key thing we see in privacy is that companies have made a decision to privatize privacy.”

—Christian Sandvig, associate professor of communication studies at the University of Michigan

Data—big data—and its benefits are cheered by client and agency and platform alike. But when data is the subject, privacy inevitably becomes a part of the conversation too. So it was at an early April 2016 Monday staff meeting at MediaLink. Often at these weekly meetings MediaLink invites a client to bring them up to date on what they're doing. On this day, it was Foursquare's turn. The location-based mobile app was launched in 2009 to much fanfare, then lost altitude, and more recently had climbed to fifty million monthly users, $100 million in annual revenues, and attracted clients like Microsoft and Capital One. Wenda Millard turned over the floor to Michael Rosen, Foursquare's vice president of sales, who sketched how his company had changed. They still rely on the GPS in smartphones to follow and locate people and
allow friends to share where they are at any moment. But they've abandoned awarding stickers and badges and encouraging users to be christened, say, mayor of a local Starbucks, which was cute but didn't generate much marketing dollars.

Rosen said Foursquare currently provides “data intelligence marketing that can help marketers” by gathering information from hundreds of apps like Snapchat and Twitter, allowing Foursquare to offer “foot traffic location data” at ninety-three million locations around the world. And they're not just reliant on the fifty million who have signed up to be part of the Foursquare community. Foursquare thinks of itself as a public utility. When people visit the app the very first time, they are asked: “Allow Foursquare to access your location even when you're not using the app? Foursquare needs your location to help you find nearby places you'll love.” Even if you don't use the Foursquare app, if you tap “Allow,” they follow you. As is true on all sites, consumers can opt out of being tracked, though this process is often cumbersome and confusing. Privacy advocates like former senator Al Franken (D-MN) champion what he calls antistalking legislation that would require location data apps to first offer consumers a choice to “opt in” before they can collect or share consumer data, a policy fiercely opposed by digital companies and marketers. Opt in is required in some Western European countries, as well as in Japan and South Korea.

Although Foursquare—like hundreds of other apps that use location data—doesn't know your name, they follow people, as Irwin Gotlieb does, by assigning them a digital personal identifier. They can tell Bed Bath & Beyond the “path to purchase” followed by their customers because they can tell what stores their customers first visited and what store they went to afterward if they exited without a purchase. By comparing prior and current foot traffic, Foursquare can predict when business is falling off or rising, and who the foremost competitors are.

They rely on three sources of data, he explained, including first-party data “on millions and millions of vendors,” which is data from stores or credit card companies or vendors or brands that have a direct relationship with their customers. Like other companies, Foursquare fattens their consumer profiles by purchasing less direct second- and third-party data from a variety of sources, including government agencies like motor vehicles and the vast array of data traffickers—Palantir, Acxiom, Experian, IBM's Watson, Oracle's Datalogix, among others—who sell nonpersonalized data to marketers.

In addition, Foursquare has data on those who see an ad on television and then visit a store. They can tell whether you've visited Shake Shack or a bar once or twice that week, and can target you as a likely hamburger eater or beer drinker, which advertisers will pay for. They can compute the wait times at checkout counters, which stores seeking a competitive advantage will eagerly pay for. By wirelessly communicating with in-store Bluetooth radio transmitters known as beacons, stores can transmit a discount coupon to a mobile phone, directing the consumer to a bargain counter. Being able to predict foot traffic is an enticement for retail clients to flock to Foursquare, as Target, Home Depot, and Whole Foods have done.

When Michael Kassan is asked about privacy, he skates over the surface of the question, acknowledging that there is “a delicate balance. We all like to get Amazon recommendations for this book or that book. We like it because it makes our life more efficient. In part, we think it's great that people can predict where we want to go and lead us to places we're interested in. But the delicate balance is that you don't want it to be scary. . . . You start to get worried as an individual when
they
know too much, whoever
they
are.” Like his brethren in the marketing business, however, Kassan doesn't see “a delicate balance” when it comes to requiring companies to have consumers opt in. “I don't think we've figured out a good way to have an opt in really
work, because nobody reads the fine print. We still live in a world where as a lawyer I would say that if you shop for a hotel and you go online and it says, ‘Agree,' have you ever read what you agree to? I don't think people read the language.” Translation: Companies and advertisers would be denied valuable marketing data because confused consumers would not opt in. Kassan is a true-blue marketing man. His first instinct is to protect marketers.

Marketers are awash in data.
Think of Irwin Gotlieb's secret sauce and many of the 40,000 personally identifiable attributes it plans to retain on 200 million adult Americans, each assigned a digital identifier. Of the 130 billion daily ad pages displayed on the Internet each day, a senior executive at WPP's Xaxis says they can follow about 40 percent of all online ads, allowing them to better understand what advertising results in sales. This is small potatoes, he suggests, noting that over time Carolyn Everson's Facebook sees trillions of online ads. But by tracking what users search and watch and do online, GroupM's Brian Lesser says, hopefully exaggerating, “We know what you want even before you know you want it.”

Among its two billion worldwide users, Facebook assembles about a hundred personally identifiable attributes and purchases, including personal information from many of the five thousand data brokers around the globe who gather pharmacy records, store loyalty cards, voter registration, mortgages, pay stubs, and other data, according to author Sue Halpern, a scholar-in-residence at Middlebury College.
*
ProPublica
, which has ferociously chewed on the privacy issue like a dog on a bone, wrote, “Facebook offers advertisers more than 1,300
categories for ad targeting . . . Every time a Facebook member likes a post, tags a photo, updates their favorite movies in their profile, posts a comment about a politician,” browses the Web, or taps WhatsApp and Instagram on a mobile phone, “Facebook logs it.”
*

Google has merged all the data it collects from its 3.5 billion daily searches and from YouTube and other services, and it introduced a Google About Me page, offering advertisers your date of birth, phone number, where you work, mailing address, education level, where you've traveled, your nickname, photo, and e-mail address.
*
Airbnb then-CMO Jonathan Mildenhall says of the many millions of people who rent homes, “We know everything about our hosts. Likewise with our guests,” though it's a bit less specific for the latter. As for Amazon, since it is the world's largest store and knows what individuals have actually purchased, its data is unrivaled.

With Amazon's Alexa in the home, the company can gather more: Alexa is an agent that not only knows what you purchased but when you wake up, what you actually watch, read, listen to, ask for, and eat. In addition to posing a potential threat to privacy, Amazon poses a threat to Google. By 2017, roughly half of all product searches were being done on Amazon, not Google. And in challenging Amazon and Google's digital assistants, Apple tried to use the privacy issue against them, vowing not to sell your private information to advertisers
.
When 2017 ended, Apple announced that it would place its Siri digital assistant in a new HomePod that will be “less creepy” than Amazon or Google because it would deny advertisers the data they desire.

Many other companies are also awash in data. Bank of America has comprehensive information on its 50 million customers. This data-rich
customer base is replicated by every bank, Wall Street investment firm, and credit card company. Comcast, the nation's largest cable company with 22 million subscribers, has stored in its set-top boxes a wealth of personal information, from credit cards to most-watched programs, and can combine this with third-party data to compare ads viewed with purchases made. Comcast and other cable companies that span the United States collect actual viewing numbers on millions of citizens. Verizon and AT&T each had over 100 million wireless subscribers in 2016, with a mind-numbing array of personal information. Telephone and cable broadband providers retain data about what TV you watch, what banks you use, what Web sites and apps you visit, what newspapers and magazines you subscribe to, what you purchase online, what stores and restaurants you favor. Those who sweep up data can chart what drugs a consumer purchases, and “inferences about your health can be used,” warns Joseph Turow, a professor of communications at the Annenberg School at the University of Pennsylvania.

Data can be weaponized by marketers to target messages and ultimately to create what's called addressable advertising. Prowling his London office in jeans and royal blue socks, Keith Weed of Unilever grows excited as he describes how mobile phones have elevated data as a marketing tool. “When I started in marketing we were using secondhand data which was three months old. Now with the good old mobile, I have individualized data on people. You don't need to know their names. . . . You know their telephone number. You know where they live because it's the same location as their PC [and the IP address this data yields].” They know what times of the day you usually browse, watch videos, do e-mail, travel to the office or dinner, and what routes you take. “From your mobile I know whether you stay in four-star or two-star hotels, whether you go to train stations or airports. I use these insights along with what you're browsing on your PC. I know whether you're interested in horses or holidays in the Caribbean.” By using
programmatic computers to buy ads targeting these individuals, he says, Unilever can “create a hundred thousand permutations of the same ad,” as they recently did with a thirty-second TV ad for Axe toiletries aimed at young men in Brazil. If they knew the target was fond of cars, or sci-fi movies, a particular soccer team or type of music, each ad could be personally tailored.

Tapping new technologies that can compute the emotional reactions of consumers reduces the guessing done by marketers. In recent years a number of companies have emerged to create a database of thousands of different facial expressions, and software translates these into algorithms that describe their meaning. Using Webcams and security cameras, marketers monitor the facial expressions of consumers as they shop, decide to exit a store, watch ads, or video chat. Apple's iPhone X, introduced in late 2017, recognizes faces, not just the owner's: Obviously, the same technology can help detect whether a child is in pain after an operation or an alleged terrorist is lying.

If big data was one of the flavors of the year in late 2015 and into 2016, targeting and addressable messages was an accompanying flavor. It was a flavor sampled all over the world. In 2015 and early 2016, Tencent's Online Media Goup in China entered partnership agreements with WPP, Dentsu, and Omnicom to access Tencent's consumer database of about 800 million monthly users. Together, they set out to develop models to trace the online behavior of Tencent's consumers. Tencent was trading its valuable data for the marketing dollars of agency clients. A new slew of start-ups emerged, hoping to either partner with or nudge aside agencies to help brands identify targeted customers.

SocialCode is one of these start-ups. Its CEO is Laura O'Shaughnessy, and it is funded by her dad, former
Washington Post
owner Donald Graham. After graduating from business school and working in digital start-ups, O'Shaughnessy believes that a “complete
transformation” is coming in the way “brands can connect to consumers. Back in the days when my grandmother ran the
Washington Post
, there were four or five channels to reach people in Washington, D.C. There were two newspapers and three television stations. Period.” Today platforms have proliferated, as have the marketing messages hurled at consumers. “Marketing became offensive. I was seeing messages that were irrelevant to me, that I didn't care about. It was a waste of my time.”

Like those at Foursquare, to her way of thinking SocialCode and its 230 employees, half of them engineers, were serving consumers, not just making money on clients such as Macy's and Budweiser. By targeting individuals on social media, by sometimes creating the ads, and then using programmatic buying to deliver individualized messages, they were offering ads “that are relevant to me, that are useful to me. And I can tell when I serve the ad whether that person made a purchase and checked it out in a retail store.” The way it works, she explains, is they decide on a target group, say those who drink a particular beer brand. Their client, another beer brand, pays for ads that are created by her company or the ad agency. These ads are relevant, she thinks, because they are aimed at persuading a group of beer drinkers to switch. They serve up the ads, track whether the individuals saw the ads, and then, relying on store data assembled by Oracle's Datalogix from its many store clients, they track whether “user 123 who was served an ad” switched beer brands.