Mary-Lynn Cesar, Kapitall: Big data brings in hundreds of billions of dollars to those who know how to use it.
You may not have heard of Acxiom (ACXM), but it most certainly has heard of you. Each week, out in a data center in Conway, Arkansas, the marketing technology firm’s 23,500+ servers process more than a trillion transactions from over 700 million consumers worldwide.
Acxiom has roughly 1500 data points on each individual in its database, which is why besides knowing publicly available information like home ownership, marital status, and political affiliation, it also knows your age, sex, race, level of education, family size, health concerns, interests, shopping habits, predilections… and much more. The firm then sells this information to its clients, like FedEx (FDX), HP (HPQ), and Sephora, to help them deliver direct marketing more effectively to consumers.
This is the multibillion dollar data brokerage industry, a world where Acxiom and a handful of other data mining firms reign supreme. It’s why Facebook (FB) included Acxiom in a group of select companies to assist with the expansion of the social network's advertising offerings earlier this year: Acxiom helped enhance Facebook’s custom audiences tool and launched partner categories, a new feature that lets advertisers choose audiences based on data-driven insights available from Acxiom.
Advertising is big business for Facebook, representing 88%, or $1.6 billion, of the $1.81 billion generated in revenue in the second quarter of 2013. And in July during the company’s most recent earnings call, COO Sheryl Sandberg commented on the success of custom audiences, stating “the number of marketers using custom audiences more than doubled relative to Q1.”
Click on the image below to see Facebook's sales data over time.Yet, despite its prominence as a consumer data broker, Acxiom tends to fly relatively, and comfortably, under the radar. At least, that was the case until last Wednesday when the firm unveiled its new consumer portal AboutTheData.com. The beta site lets users log in and view, as well as edit, the personal data the firm has collected and maintains on file. “Make Data Work for You – know what data says about you and how it is used” the home page reads, reiterating the company’s claims of increasing transparency and empowering customers. The timing of the portal’s launch couldn’t have been better considering Acxiom is currently under investigation by the Federal Trade Commission.
Privacy concerns in a barely regulated industry
Last December, the FTC announced it was reviewing the data collection and usage methods of nine major data brokers in order to analyze the industry’s privacy practices. In addition to Acxiom, the FTC subpoenaed information from Corelogic (CLGX), Datalogix, eBureau, ID Analytics (owned by LifeLock (LOCK)), Intelius, Peekyou, Rapleaf, and Recorded Future.
The investigation is one of several data brokerage-centric measures recently undertaken by the consumer protection agency. In June 2012, the FTC successfully levied an $800,000 penalty against data collector Spokeo in its first foray into tackling the sale of online and social media data for use in employment screening. And this past June, FTC Commissioner Julie Brill proposed an industry-wide “Reclaim Your Name” initiative where data brokers provide consumers with access to their personal data.The idea that companies with data mining operations should increase the transparency of their records isn’t new. Google (GOOG) released its Ad Preferences Manager tool – now under Ads Settings – in March 2009 to allow users to view and edit interest categories or opt-out from targeted advertising. Later that year, data aggregator BlueKai launched the BlueKai Registry, which does the same for consumer shopping preference data. However, thanks to the relative lack of laws governing data brokerage, “Reclaim Your Name” won’t amount to more than a suggestion or, at best, a voluntary program. The viability of "Reclaim Your Name" could change if the report from the FTC's investigation advises legislators to introduce more regulation to the industry. Big business
Data became a $300 billion industry in 2012, and it’s positioned for immense growth over the coming years due to the expansion of the digital universe. According to market research firm IDC, 2837 exabytes of data comprised the digital universe in 2012; that number is expected to rise to 8591 by 2015 and soar to a whopping 40,026 in 2020. The World Economic Forum has described personal data as a valuable asset class, writing in a 2011 report that it will generate “a new wave of opportunity for economic and societal value creation.”After earning nearly $1.1 billion in revenue during fiscal 2013, down 2.8% from 1.13 billion in fiscal 2012, Acxiom has good reason to try and appease the FTC’s calls for greater transparency. Any industry legislation to emerge from Washington DC would make it harder for the data broker to maintain the status quo, which lately has been less than stellar. Acxiom posted year-over-year losses in revenue over the last six quarters, the latest being its 2% decline to $266 million during the first quarter of fiscal 2014. And this year, by July, Acxiom had already lost six customers. While the FTC plans to release its industry report later this year, the company is counting on its soon-to-launch Acxiom Audience Operating System, a cross-channel, cross-platform targeted marketing technology, to usher in a much more exciting and successful era. Click on the image below to see Acxiom's sales data over time. Dig Deeper: Compare analyst ratings to annual returns for stocks in this article.
Do you see investment opportunities in big data? Use the list below as a starting point for your own analysis.1. Acxiom Corporation ( ACXM): Provides marketing technology and services that enable marketers to manage audience, personalize consumer experiences, and create customer relationships. Market cap at $1.93B, most recent closing price at $26.18.
2. Facebook, Inc. ( FB ): Operates as a social networking company worldwide. Market cap at $107.71B, most recent closing price at $44.75. 3. FedEx Corporation ( FDX ): Provides transportation, e-commerce, and business services in the United States and internationally. Market cap at $34.58B, most recent closing price at $108.39. 4. Hewlett-Packard Co. ( HPQ ): Offers various products, technologies, software, solutions, and services to individual consumers and small- and medium-sized businesses (SMBs), as well as to the government, health, and education sectors worldwide. Market cap at $42.36B, most recent closing price at $21.96. 5. CoreLogic, Inc. ( CLGX ): Provides property, financial, and consumer information, analytics, and services to mortgage originators and servicers, financial institutions, government and government-sponsored enterprises, and other businesses in the United States. Market cap at $2.5B, most recent closing price at $26.17. 6. LifeLock, Inc. ( LOCK ): Provides identity theft protection services for consumers; and identity risk assessment and fraud protection services for enterprises in the United States. Market cap at $1.21B, most recent closing price at $13.84. 7. Google Inc. ( GOOG ): Builds products and provides services to organize information and make it universally accessible and useful. The world's most popular search engine. Market cap at $296.92B, most recent closing price at $893.06.
(Written by Mary-Lynn Cesar, Kapitall writer. Quarterly sales data sourced from Zacks Investment Research.)