New Regulations on Data Brokers Could Risk $110 Billion in Revenue | Adweek
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Big Data Added $156 Billion in Revenue to Economy Last Year [Updated]

With new study, DMA aims to shape privacy debate in Washington

Photo: Getty Images

Responding to growing Washington attacks on data brokers, the Direct Marketing Association is mounting its biggest defense by unveiling a new study Monday during its annual conference in Chicago. The study quantifies how much of the economy is driven by companies that use consumer-level data to market and retain consumers.

The report estimates that in 2012, the data-driven marketing economy added $156 billion in revenue to the U.S. economy and fueled more than 675,000 jobs. To put that statistic in perspective, that's nearly half of total U.S. expenditures on marketing and advertising services (estimated at $292 billion annually), more than half the size of the entire Internet ecosystem (estimated by the IAB at $300 billion) and more than two-thirds the size of the entire e-commerce market. Their conclusions were based on interviews with about 650 companies, including online publishers like the New York Times and ESPN, ad agencies and ad networks, platforms like Google, Facebook, and Amazon, as well as the U.S. postal service and email deployment firms like Chita Mail. 

Since last year, the DMA has felt the heat from a string of investigations opened by the House privacy caucus, the Senate commerce committee and the Federal Trade Commission. The FTC's report is expected to be released at the end of the year. At the request of Sen. Jay Rockefeller (D-W.Va.), the Government Accountability Office is also studying "information resellers."

"With all the investigations and articles about privacy, we felt our industry was under siege," said Linda Woolley, the president and CEO of the DMA in a press conference.

Reacting to some of the pressure building in Washington—especially from FTC commissioner Julie Brill—that data brokers need to be more transparent about the data they collect and share with other companies, Acxiom, one of the nation's largest data brokers, recently launched a consumer portal that allows consumers to access what data the company has about them and lets them make changes or opt-out. 

The DMA hopes that its economic impact numbers will give policymakers and legislators pause before they seek new laws that might impede the business and hurt jobs in an already challenged economy. The study's authors, Harvard University professor John Deighton and Peter Johnson, an adjunct professor at Columbia University, estimated that new regulations that restrict the exchange of data across the marketing economy could risk $110 billion in revenue and 478,000 jobs.

Just about every company in America, both large and small, collects data on its customers these days, but the biggest losers from additional regulation would be startups and small businesses because they would no longer be able to use data to overcome barriers to entry, raise ad-supported revenue or identify new and niche markets to serve.

"Small businesses can achieve national scale with extremely small entry costs," said Prof. Johnson during the press conference. "Without data-driven marketing, small firms would be stuck back in the 19th century."

Also impacted could be social benefits, like Google Flu Trends, which uses data to project flu outbreaks, and political organizations, which pioneered mining individual consumer level data for campaigns.

"If policy decision makers are considering regulation and legislation, we hope they will take this study into consideration and not do anything that will stifle innovation and growth in this area," Woolley said. "If they do, they will be doing it at their own peril and at the peril of the U.S. economy."

On Oct. 29, the DMA will be hosting an event around the study with policymakers and industry leaders. Rep. Lee Terry (R-Neb.), the chairman of the commerce, manufacturing and trade subcommittee who will be holding a series of privacy hearings in the comings months, will be giving the keynote. And in what will no doubt be a lively panel, the FTC's director of consumer protection Jessica Rich will face off with Venable partner Stu Ingis, ValueClick's chief privacy officer Jason Bier, and Pam Dixon, the executive director of the World Privacy Forum.

Here's a DMA infographic showing the interconnected web of revenue and jobs sustained by the data-driven marketing economy.

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