REDWOOD CITY, Calif. — “You are walking around naked on the Internet and you need some clothes," said Michael Fertik. “I am going to sell you some."
Naked? Not exactly.
Fertik, 34, is the chief executive of Reputation.com, a company that helps people manage their online reputations. From his perch here in Silicon Valley, he views the digital screens in our lives, the smartphones and the tablets, the desktops and the laptops, as windows of a house. People go about their lives on the inside, he says, while dozens of marketing and analytics companies watch through the windows, sizing them up like peeping Toms.
By now many Americans are learning that they are living in a surveillance economy. “Information resellers," also known as “data brokers," have collected hundreds to thousands of details — what we buy, our race or ethnicity, our finances and health concerns, our Web activities and social networks — on almost every American adult.
Other companies that specialize in ranking consumers use computer algorithms to covertly score Internet users, identifying some as “high-value" consumers worthy of receiving pitches for premium credit cards and other offers, while dismissing others as a waste of time and marketing money. Yet another type of company, called an ad-trading platform, profiles Internet users and auctions off online access to them to marketers in a practice called “real-time bidding."
As these practices have come to light, several members of Congress, and federal agencies, have opened investigations.
At least for now, however, these companies typically do not permit consumers to see the records or marketing scores that have been compiled about them. And that is perfectly legal.
Now, Fertik, the loquacious, lion-maned founder of Reputation.com, says he has the free-market solution. He calls it a “data vault," or “a bank for other people’s data."
Here at Reputation.com’s headquarters, a vast open-plan office decorated with industrial-looking metal struts and reclaimed wood — a discreet homage to the lab where Thomas Edison invented the light bulb — his company has amassed a database on millions of consumers. Fertik plans to use it to sell people on the idea of taking control of their own marketing profiles. To succeed, he will have to persuade people that they must take charge of their digital personas.
Pointing out the potential hazards posed by data brokers and the like is part of Fertik’s M.O.
Covert online profiling and scoring, he says, may unfairly exclude certain Internet users from marketing offers that could affect their financial, educational or health opportunities — a practice Fertik calls “Weblining." He plans to market Reputation.com’s data vault, scheduled to open for business early next year, as an antidote.
“A data privacy vault," he said, “is a way to control yourself as a person."
Reputation.com is at the forefront of a nascent industry called “personal identity management." The company’s business model for its vault service involves collecting data about consumers’ marketing preferences and giving them the option to share the information on a limited basis with certain companies in exchange for coupons, say, or status upgrades. In turn, participating companies will get access both to potential customers who welcome their pitches and to details about the exact products and services those people are seeking. In theory, the data vault would earn money as a kind of authorization supervisor, managing the permissions that marketers would need to access information about Reputation.com’s clients.
Are vaults necessary?
To some, the idea seems a bit quixotic.
Reputation.com, with $67 million in venture capital, is not making a profit. Although the company’s “privacy" products, like removing clients’ personal information from list broker and marketing databases, are popular, its reputation management techniques can be controversial. For instance, it offers services meant to make negative commentary about individual or corporate clients less visible on the Web.
And there are other hurdles, like competition. A few companies, like Personal, have already introduced vault services. Also, a number of other enterprises have tried — and quickly failed — to sell consumers on data lockers.
Even so, Fertik contends Reputation.com has the answer. The company already has several hundred thousand paying customers, he says, and patents on software that can identify consumers’ information online and score their reputations. He intends to show clients their scores and advise them on how to improve them.
“You can’t just build a vault and wish that vendors cared enough about your data to pay for it," Fertik said. “You have to build a business that gives you the lift to accumulate a data set and attract consumers, the science to create insights that are valuable to vendors, and the power to impose restrictions on the companies who consume your data."
The consumer data trade is large and largely unregulated.
Companies and organizations in the U.S. spend more than $2 billion a year on third-party data about individuals, according to a report last year on personal identity management from Forrester Research, a market research firm. They spend billions more on credit data, market research and customer data analytics, the report said.
Unlike consumer reporting agencies, which compile credit reports, however, business-to-business companies that calculate consumer valuation scores, or collect and sell consumer marketing data, are not required by federal law to show people the records the companies have about them or allow them to correct errors in their own files.
Marketing industry groups argue that regulation is unnecessary. They say websites have privacy policies to explain what data they and their business partners collect. They add that third-party data collectors do not know Internet users’ real names and compile consumers’ online marketing records under customer code numbers. Besides, they say, Internet users who are uncomfortable with seeing ads based on data-mining about themselves may use an industry group’s program, Your Ad Choices, to opt out of receiving customized pitches.
As the popular conversation shifts from practices like privacy policies and opt-outs to ideas like consumer empowerment and data rights, however, marketing industry efforts have not kept pace with changing public attitudes, analysts say.
“Consumers are leaving an exponentially growing digital footprint across channels and media, and they are awakening to the fact that marketers use this data for financial gain," Fatemeh Khatibloo, an analyst at Forrester, wrote in the report. “This, combined with growing concerns about data security, means that individuals increasingly want to know when data about them is being collected, what is being stored and by whom, and how that data is being used."
A variety of industries could respond by providing services that offer consumers greater control, she wrote. These might include online companies like Yahoo, Microsoft and Google that already house certain categories of data for consumers; social networks like Facebook and LinkedIn; data vaults like Personal, which allow consumers to store and manage certain kinds of data; and companies like Reputation.com whose business model already relies on customers willing to pay for data privacy.
Whose data is it?
With increasing complaints by consumer advocacy groups and investigations by the media, the surveillance economy is attracting greater government scrutiny. Two separate efforts in Congress are examining practices by third-party consumer data collectors. Regulators at the Federal Trade Commission and researchers at the Government Accountability Office are also investigating. In a report this year, the FTC recommended that Congress pass a law giving consumers the right to have some access to the records data brokers compile about them.
“We have a right, I think, to all of the data we have a hand in generating," Khatibloo said. “I have the right to know who is tracking me online, who is looking at my behavior as I move from site to site, what data they are collecting, all of these."
Fertik, blue marker in hand, sketches his vision of a data vault on a white board in a conference room at Reputa tion.com’s headquarters.
“The problem is you don’t own your data," he said. “Now, imagine owning your data."
He sketches a silo and labels it “data privacy vault." To the left of the silo, he draws an arrow saying “IN: data about people." To the right of the vault, he draws another arrow which says “OUT: data to vendors."
It is a system he has previously described at the World Economic Forum in Davos, Switzerland; at Harvard Law School; at the Aspen Institute. He points to the diagram.
“This is the future. Let me demystify it. This is not difficult technology," he said. “It’s a database where you put your data, or we put it for you, and there are some rules as to how it is externalized or shared."