Carriers Sell Users’ Tracking Data in $5.5 Billion Market

Transportation consultant Fehr & Peers, studying the commuting habits of California residents last year, got 300 responses from 5,300 postcard surveys sent by mail. Using cellular signals over the same period, Fehr was able to track travel patterns for 76,500 handset users.

Fehr was testing a new service from Atlanta-based startup AirSage Inc. that tracked wireless signals from consumer phones in near-real time. The test was so successful that Fehr has expanded use of AirSage data to five projects this year from just one in 2012.

“Now we have a thousand times more data,” Mike Wallace, a senior associate at Fehr, said in an interview. “The prices are generally comparable. In the future, we’ll do less of the traditional method.”

As demand from transportation planners, retailers and marketers grows, scores of companies, including AirSage, ComScore Inc. and SAP AG -- which entered the market on May 21 -- are taking mobile-user data from carriers like Verizon Wireless, analyzing it and packaging it into reports they can sell. AirSage’s revenues are rising by 25 percent a quarter, according to the company.

While privacy advocates question the practice and the government is considering tighter regulations, carriers view it as welcome extra revenue as voice calls continue to decline and contract subscriber growth slows.

$9.6 Billion

Phone companies already collect data on user location, as well as Web surfing and application use, to adjust their networks to handle traffic better. Two carriers, Verizon Wireless and Sprint Nextel Corp., are just starting to make the data available to third-party companies in hopes of booking millions in sales. Worldwide, revenue from selling mobile-user behavior data may reach $9.6 billion in 2016, up from $5.5 billion last year, Walldorf, Germany-based SAP estimated.

“The value of mobile subscribers is flattening out, and wireless operators are all interested in new ways to generate revenue,” Cy Smith, chief executive officer of AirSage, said in an interview. “The value of this data is still in the early stages of being recognized.”

Carriers get a portion of revenue that companies like AirSage and SAP will make from selling their reports. SAP will charge marketing agencies and advertisers for subscriptions starting at thousands of dollars a month, John Sims, president of SAP Mobile Services, said in an interview.

“Our target here is to help mobile operators to generate new sources of revenue,” Sims said.

Daily Terabytes

Phone companies are piling up data at a rate of one to two terabytes a day for every 20 million to 30 million wireless customers, according to SAP. One terabyte is 8,000 times more data than the human brain retains in a lifetime, according to International Business Machines Corp. As a point of comparison, the U.S. Library of Congress adds about five terabytes of data a month.

The phone data can indicate what kinds of websites are most popular within a particular location on a specific day, allowing marketers to better tailor ads to viewers. The information can show how a population moves through a shopping mall within the work week. The sample size can be much larger than anything that app providers, operating-system makers like Google Inc. and Apple Inc., or mobile-ad networks like Millennial Media Inc. can gather.

‘Granular’ View

“It’s a census type of view -- it’s very, very granular,” Jason Clift, senior mobile-product marketing manager at researcher ComScore, said in an interview.

For the past two years, ComScore has been getting aggregated mobile-user data from wireless carriers in the U.K. and sifting it to find out how many people go to a particular website or an app on their device. Marketers use the data to figure out where to advertise.

Some carriers are creating units to get into the business themselves. Sprint’s Pinsight Media+ uses what it calls anonymous, aggregated consumer data to help advertisers reach target audiences through mobile devices. Verizon’s Precision Market Insights service works with other retailers and advertisers at large venues such as sports events. For example, New York-based Verizon and the National Basketball Association’s Phoenix Suns work with marketers to understand their audiences and to better hone advertising.

Customer Option

Other U.S. carriers haven’t yet jumped into the customer data-selling market as they weigh the privacy risks against the potential sales rewards. AT&T doesn’t sell data about its wireless customers, said Mark Siegel, a spokesman at the Dallas-based carrier. T-Mobile US Inc. doesn’t have a data-sales unit, said Anne Marshall, a spokeswoman.

Verizon, which began offering user data in 2012, lets customers opt out of the service. Most carriers aggregate the data and make it anonymous.

“We don’t sell raw data,” said Debra Lewis, a Verizon Wireless spokeswoman. “Our data is put through analysis and it comes out the other side as insights.”

Separately, the National Security Agency is collecting the records of millions of Verizon Communications Inc. customers in the U.S., relying on a secret court order granted in April, the Guardian newspaper reported.

The newspaper said it obtained a copy of the order covering phone numbers as well as the location and duration of calls. White House officials declined to comment on the report.

‘Seriously Personal’

Customers have to opt in to Sprint’s program. In exchange for allowing Sprint to sell the anonymous user data, customers get more specific ads sent to their phones.

“We offer exclusive, in-depth audience data to drive advertising that is timely, relevant and effective,” according to a Pinsight Media+ statement provided by John Votava, a Sprint spokesman.

Still, privacy advocates say data protections don’t go far enough.

“Even when they anonymize the data, it only takes a few data points of where you are located to establish your identity,” Dave Maass, a spokesman for the Electronic Frontier Foundation, said in an interview. “You get a few more things -- a doctor’s office, a church -- and you get seriously personal information about somebody.”

Maass said carriers should only collect information from subscribers who opt in to the program -- or at least make it easy for them to opt out.

Federal Communications Commission Acting Chairwoman Mignon Clyburn is seeking a ruling to protect against disclosure of some personal information by mobile-phone companies, according to a statement yesterday.

Even with these challenges, an increasing number of carriers are giving data sales serious consideration, said Michael Stone, CEO of Amethon Solutions Pty, which helps carriers track mobile-user information for network optimization. Amethon is considering getting into related third-party data-mining services, he said.

“We’ve been talking to carriers for a few years,” he said. “All of a sudden there’s a lot more interest.”

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE