Location Data Industry Gets Huge Wake-Up Call on Monday

Platforms, brands, and vendors benefiting from the reams of location data used to hit consumers with highly targeted ads should be paying attention to a change suggested by Google and Facebook’s recent appearances before government authorities, a New York Times exposé out Monday, and most importantly the impending arrival of GDPR-like legislation in the United States: 2019 will be the year privacy actually matters, posing a potentially devastating threat to the status quo of the location data and marketing industries.

The industry is asleep. While reports indicate that consumers are increasingly wary of corporate infringements upon their private information, 2019 is nevertheless estimated to be the biggest year ever for the third-party data ecosystem. Marking a 17.5% YOY increase, companies will spend $19.2 billion to purchase and manage third-party data—data collected from consumer interactions with digital properties those companies do not personally own—in 2019, AdExchanger reported.

This is all happening at a time when a major, statewide privacy law is slated to hit California Jan. 1, 2020. The California Consumer Privacy Act, Freckle IoT and Killi Founder and CEO Neil Sweeney writes, will “shake the digital marketing ecosystem to its very core.”

How is the scaffolding emanating from that core going to crumble in 2019?

Firstly, so-called data lakes, the large sources of information on the basis of which location data-collecting companies have raked in billions, are going to turn into what Sweeney calls “data swamps,” massive liabilities that will threaten any company hoping to make money off data collected from obscure sources and with dubious permission. The path forward will be first-party data that consumers have clearly opted to hand over to the apps and sites now stealthily collecting and capitalizing on it. But this quality, regulation-compliant data will come at a premium, Sweeney expects, prompting agencies and vendors to make up disappearing margins by passing the burden off to brand clients. That’s not a hot scenario for brands.

Secondly, with the premium on data rising and consumer and regulatory scrutiny over bad-faith data collection practices reaching a fever pitch, the industry will need to took for new ways to make a good-faith deal with consumers and collect their data more transparently. In other words, the next couple of years’ privacy laws—and they won’t just be limited to California, as other progressive state governments will likely seek to make similar changes—will necessitate a paradigm shift in how companies seek to understand the identities of consumers. That means admitting that collecting location data is tantamount to harvesting the identity—down to deeply personal details, such as which businesses people patronize and whose houses they visit—of consumers.

And that’s what this week’s NYT exposé is all about. The authors meticulously demonstrate the way location data collectors can develop a sophisticated understanding of any given consumer’s personal life and preferences. Given the amplified media attention, consumers will become markedly more informed about that state of affairs.

Expect other publications to follow the Times’ lead and for regulators to start sounding a bit more prepared to talk about tech than they did at Mark Zuckerberg’s Washington hearing earlier this year, when it became clear that Facebook and other tech companies are currently dancing in shadows conjured by legislators’ ignorance. The fact that the press is putting so much effort into rendering data collection practices intelligible for the average reader, just at the moment when Sundar Pichai is sitting down with federal legislators, should have location data’s beneficiaries on red alert.

Joe Zappa is Street Fight’s managing editor.