What Are Some of the Largest Companies Using Data And How Do They Make Money From It?
We often hear about companies using data that they collect from us online but what exactly do they do with it? The average person knows that they share data with websites and businesses on a regular basis but they often don't realize just how much money these companies are making from that data.
The thing is, all of that data really belongs to you, so you should be concerned about the fact that companies all over the world are harvesting it without you knowing and then making millions from it every year. As we become more reliant on technology and systems for collecting and processing data become more advanced, this industry will continue to expand, and other people will be getting rich using your data.
So, who exactly is collecting all of this data and how are they making so much money from it?
Who Collects Your Data?
There are all sorts of different companies using data. Social media companies, such as Facebook and Google are some of the biggest companies using your data. They store and use the data that you share on their websites for all sorts of different purposes. However, smaller companies still collect information about your location and online activity. Anything from searching for a local restaurant to uploading a photo of yourself can be tracked by these companies. Whenever you go online, it's likely that somebody is collecting data about you.
Cookies are used on websites to keep track of your browsing activity and they often use that data to collect demographic information about who you are as a customer. This information is then shared with advertising companies, giving them valuable insight into what kind of products you're going to be interested in buying.
Companies also collect email addresses so they can send you targeted advertising. When you buy something online, it's likely that at least one company you did business with was able to share your data with another business.
Also worth noting is the fact that many advertisers are actually buying information about potential customers from data brokers. These organizations sell information, including names, addresses, email addresses, etc., that have been collected over time by other companies or websites. This is all public information that anybody can get their hands on (usually for a price).
Some of the Biggest Companies Making Money From Data
Facebook and Google are ultimately the big winners at the end of the day. However, they need data from third-party providers, called data brokerages. Lets take a look at the five biggest data brokerages in America. Some of these are private traded companies and they do not have data revenue available:
What Do They Do With It?
Once companies have collected all of your data, what do they actually do with it and how do they make money from it?
As we've already discussed, data brokers buy and sell data to companies and this is a huge industry. Often, large email lists will be bought by companies who will then use them to send out marketing emails.
Social media platforms like Google and Facebook also make use of the data that you share on their sites when it comes time to target ads at you. The more information that they have about you, the easier it is for them to pick relevant advertisements that are likely to catch your eye. This also allows them to place adverts in places where they're more likely to be seen by people who are suitable targets for the product being promoted. Businesses then pay the platform to display the ads.
Online advertising is a massive industry and it is estimated that, in 2018, it generated $108.6 billion worldwide and the personal information of American internet users was worth $56.5 billion.
Companies using data also leverage your personal information to improve their service or create new products, meaning that they can generate more revenue. Netflix is a great example of this. After identifying their users' preferences, they were able to use that data to recommend new shows and movies that they may enjoy watching. These algorithms are designed to create a personalized service and ensure that users keep paying their subscriptions.
Product development is also very data-driven these days. Let's say that a company is thinking of releasing a new product. The marketing team might look at the data that they have collated on their customers to see if there are any specific trends or characteristics that they should be targeting. The more information they can gather, the better chance they have of creating something people want. By producing more targeted products, businesses are able to better meet the needs of their customers and generate more revenue.
The business of data management itself is also making a lot of people very rich. There are huge amounts of data on the internet and only some of it is useful. Businesses don't have the infrastructure or the understanding to be able to pick through it all and then draw useful conclusions about customers or market trends. Data management companies help by sorting through the data and creating structured reports from it. They can then sell those to their clients, allowing them to make meaningful decisions about their business based on the relevant data.
With the introduction of smart devices, companies are able to collect more data than ever before. The Apple Watch, for example, is able to track your heart rate, steps taken and calories burned. This data is then sent back to the company's HQ where it can be used in conjunction with all of that other information that has been collected about you. As these kinds of devices become more widespread and the amount of detailed information that companies collect grows, data management services will become increasingly central to the economy and their revenue will grow.
Data is a multi-billion dollar industry and whenever you go online, you are giving up valuable information about yourself. Companies using data can either sell it on or use it to create more revenue-generating opportunities. The problem is, you never see a slice of the profits, even though it's your data that they are monetizing. So, we should all be more cautious about how we share our data online because you never know where it could end up or who could be getting rich from it.