Pitt professor RICHARD FRANKLIN explains how businesses track what you're doing (and criminals and governments, too)
March 31, 2013 4:00 AM
By Richard Franklin
You have considerable reason to be worried about your privacy these days. Countless criminals would like to steal your identity, empty your bank accounts and plunder your credit cards. You are wise to safeguard your personal information, protect yourself against phishing and avoid questionable websites.
But your privacy is also threatened -- quite legally -- by tech companies such as Google, Amazon, Apple, Facebook and credit-rating bureaus like Experian, Equifax and TransUnion.
In the United States, there are few uniform laws or regulations regarding what these firms can collect or do with the data they collect. Meanwhile, two new technologies, Big Data and predictive analytics, give businesses -- and governments -- powerful tools to become increasingly intrusive.
Big Data refers to data sets so large and complex that they cannot be processed using traditional database tools. The information is gathered by point-of-sale systems, mobile devices, cameras, microphones, automobiles, radio-frequency identification readers, Internet searches and online tracking technologies. Popular examples are the detailed transaction data saved by retailers like Wal-Mart; the searches you conduct on Google; the "likes," "shares" and "check-ins" you post on Facebook, and the location and other information collected by smartphones and tablet devices.
Predictive analytics use a variety of techniques, from statistics, modeling and data mining, to analyze current and historical facts and then make predictions about future events. In business, patterns are sought to identify relationships among factors to guide, among other things, more effective marketing. Customer targeting is a primary objective.
Just how accurate targeting can be has been illustrated by Target. The retailer tracks the buying history and demographic information of all customers.
One way Target leverages the information is through women who sign up for its baby registry. Purchase patterns emerge, which are predictively applied to women not on the baby registry. Target then sends baby-item coupons to customers according to their pregnancy profile.
One such mailing aroused the ire of the father of a teenage girl who had received it. He complained to Target: Were they trying to encourage her to become pregnant? Shortly thereafter, he apologized to the chain, as he subsequently learned that his daughter was indeed pregnant but had been hiding it from him. Target knew the girl was pregnant before her father did.
Dynamic pricing is another common application of predictive analytics. Retailers can change the price of an item based on algorithms that include estimates of potential customers' willingness to pay. Online retailers have our personal data. They know what we've purchased, even how many times we've looked at a product. Companies are starting to use this information to figure out how much they can charge each shopper for each item.
Big Data and predictive analytics have come together to uncover hidden patterns, unknown correlations and other information that can provide organizations with new customer and business insights. Examples are numerous:
• Facebook "likes" can reveal, among other things, an individual's political and religious views, drug use, marital status and sexual orientation. Researchers can distinguish between Democrats and Republicans 85 percent of the time, between black and white people 95 percent of the time, and between homosexual and heterosexual men 88 percent of the time.
• Experian, Equifax and TransUnion, the big three credit-rating companies, sell demographic cluster data and home addresses to marketing firms and retailers.
• Health insurance companies buy marketing data to monitor us. Blue Cross/Blue Shield of North Carolina recently began buying shopping data on people in its employer group plans. If someone were to buy plus-size clothing, for instance, the plan could flag them for potential obesity and therefore higher health care costs.
• Insurance companies share information with each other -- your history with one company could influence the rates you pay at another for a different type of policy.
• President Barack Obama's successful 2012 campaign used a combination of massive datasets and analytical models to identify individual Republican-leaning voters who might be persuaded to vote for the president and which issues would likely trigger a switch.
Governments are interested in Big Data, of course, mainly to manage the enormous volumes of information generated by their operations. But predictive analytics could be taken to an extreme as depicted in the movie "Minority Report," which had the government tracking down citizens expected to commit crimes in the future.
Still, U.S. laws prohibit governments from maintaining information on someone without cause -- although national security agencies can monitor Americans with permission from a secret court -- but the legal landscape generally favors business over the individual.
For the individual, understanding how things work is important. A purchase, online or in person, is a tacit agreement allowing the retailer and credit card company to collect and save data about the transaction and match it with other data they have about you.
Facebook, Twitter, Pinterest, etc. do not consider you their customer. You are their product. Their customers are advertisers. Everything you post, comment, like, tweet, or pin becomes the property of the site. It can or will be used to serve the advertisers. Each app you install might track you in some way as well.
There are steps you can take to enhance your privacy. For instance, you can minimize the amount of Internet tracking by enabling a "Do Not Track" feature on your web browser. Or you can turn off the GPS feature on your phone -- although this also will disable some useful features, so it's a trade-off.
Of course, as consumers we can benefit when businesses understand us. They can make us aware of products and services that better meet our needs, often at better prices than we might not otherwise find.
But remember, while your shopping history is personal, it is not private. Nor are all those things you post and click on Facebook. So conduct yourself accordingly.