They used to say that money made the world go round but now, it’s all about data. But what exactly makes personal data valuable, and why are companies willing to invest so heavily in acquiring and analysing it? It’s time to pull back the curtain on this often intentionally secretive industry and see what’s actually being done with our data. Understanding the economics of personal data and the factors that determine data’s worth allows us to make better decisions about our data and ultimately start to take back control.
Understanding Personal Data
Personal data refers to any information that relates to an identifiable individual. This can include obvious identifiers like names, addresses, and phone numbers, as well as more subtle data points like IP addresses, browsing history, and purchasing behaviour. Every
click, every search, every online move contributes in some form as personal data and helps businesses build an online profile for you. In essence, if a piece of information can be traced back to an individual, it qualifies as personal data.
Personal Data vs. Sensitive Data
The concept of personal data is still relatively new and it is not uncommon for people to mistake personal data for their more sensitive data. While all personal data is somewhat sensitive, there is a clear distinction between the two groups and it is important to know this in order to reduce panic and misunderstanding. GDPR provides extra protection for data deemed to be particularly sensitive or fall into their defined ‘special category’.
Personal Data
Your online personal data encompasses everything that is known about you online so this varies from basic contact information to your typical behavioural habits to what types of products you are interested in or are likely to buy. This information is typically collected via cookies and forms that you fill out, which is why most websites now bug you with a ‘accept cookies’ notice as this is legally required under GDPR to ensure some form of consent is given. Obviously, the pop up nature of the prompt means that how often we all stop and read those terms and conditions is probably quite low and many major businesses such as Google and Apple have been implementing policies that look to phase out the use of cookies on their platforms. Google has implemented a phase-out campaign to phase out third-party cookies by 2024 so personal data is a key part of their plan moving forward.
Sensitive Data
Sensitive data is a specific subset of personal data that requires more stringent protection due to its potential impact on an individual’s privacy and security. Essentially, this includes things such as your health information, financial information, biometric data (DNA, fingerprints) and your political or religious opinions. This information is often under heavy safeguarding as the value of sensitive data is often higher due to its critical nature and the potential harm that misuse or exposure can cause. Consequently, regulations like the General Data Protection Regulation (GDPR) impose stricter requirements on the handling and processing of sensitive data, defined by GDPR as their ‘special category’ data.
The Value of Personal Data
Due to the growth of personalised marketing, all data has an intrinsic value attached for businesses that want to target or better understand their customers. Companies leverage this information to tailor their products, services, and marketing strategies, ultimately driving revenue and growth. Established data brokers can also leverage this data to sell your data to interested parties, creating a rich and lucrative industry where you don’t get cut or even know how much your data is worth.
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Demand in the Marketplace
As we’ve discussed, data is valuable because the market runs on your data. In a digital space, businesses’ best way of understanding you and your habits is to understand what you are searching for, buying and interacting with. Industries such as advertising, retail, and healthcare are particularly data-intensive, relying on personal data to refine their offerings and optimise operations. The more data they have, the better chance they have of making you spend with them.
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Monetisation Strategies
Data brokers are an often disregarded entity but in the age of personalised data-fed marketing, data brokers have a lot of power and they are the ones largely profiting from your data. Data brokers buy and sell data to third parties, helping to create a digital profile of you. The more complete that digital profile is, the more valuable you are to advertisers and businesses that are looking to target your demographic.
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Regulatory Environment
Entities such as GDPR are incredibly important in the digital space to help us get a better understanding of where our data is being used and helping to get better rights and protections. The more locks they managed to put in place, the more value is placed on data that is now more scarce.
Targeted advertising was a strong industry partly due to the historically looser regulations but this is continually being tightened. In fact, targeting ads are continuously in the news for being under review with big bans for ads on sites like Facebook coming into effect.
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Technological Advancements
Data analysis is a massive industry and understanding and breaking down vast amounts of data has historically been time consuming and difficult, making data brokers particularly enticing. However, with the rise of AI, businesses can now break down the data and get it to tell them exactly what they want far easier, allowing for more efficient and sophisticated analysis. These technologies can uncover hidden patterns and trends, providing businesses with actionable intelligence that drives innovation and growth.
The economics of data is a complex and evolving field, shaped by factors such as relevance, volume, timeliness, and utility. Understanding what makes data valuable is crucial for both businesses and consumers in today’s data-driven world. Personal data, in particular, holds significant value due to its ability to provide deep insights into consumer behaviour and preferences. However, the continued use of sensitive data underscores the need for robust data protection practices to safeguard individual privacy and security. It is important for users to understand what their data is worth and why it is of particular value to these big businesses so they can start to take back control of their personal data and look into ways to benefit from the system rather than the system benefitting from them.