Datalogix leads path in online tracking

Datalogix is in the vanguard of a new generation of consumer tracking companies that are pushing privacy boundaries by connecting what a person does online to how they act in the physical world.

The little-known company, which rarely talks to the press, creates incredibly detailed profiles of nearly every US household, drawing on thousands of data points. The information ranges from the kinds of products they buy at the supermarket to the make of the car they drive, as well as financial data such as the value of their home and their estimated net worth.

Datalogix specialises in transporting that data – mostly collected offline – to the web, where marketers buy them to target ads at the right consumer and to determine whether people who saw their ads actually ended up buying their products in bricks-and-mortar stores.

The company has been thrust into the spotlight after striking a new partnership with Facebook to measure the effectiveness of ads on the social network. It plans to expand to the UK in 2013.

“That is the key theme – connecting the dots between digital media and offline product sales,” Eric Roza, chief executive of Datalogix, told the Financial Times.

Privacy advocates say Datalogix represents a new world of pervasive data brokers that are quietly building vast dossiers about consumers, leading to the fast erosion of any sense of anonymity on the web.

“You are talking about the creation of massive, real-time data mining warehouses that 24/7 compile granular bits of information about all of us and sell that to the highest bidder,” says Jeff Chester, executive director of the Center for Digital Democracy. “They know everything about us, but we know nothing about them.”

Datalogix’s roots lie in the traditional direct mailing and data broker business. Founded in 2002 under the name NextAction, the company struck relationships with more than a thousand retailers across America to build one of the largest databases of its kind, based on more than $1tn in spending. It mostly used this data, collected largely via loyalty card programs, for direct mailings. All the while, it amassed an ever-larger trove of information about consumers and developed expertise analysing it.

At the start of the 21st century, the idea of merging information about a person’s activities in the real world with their online habits was contentious. In 2000, the US Federal Trade Commission started an investigation into privacy issues tied to the acquisition of Abacas Direct, which tracked people’s purchases, by DoubleClick, the online advertising company. DoubleClick later agreed not to merge the two companies’ pools of data, deterring others from going down that path.

But by 2009, the world had changed. A handful of companies started pushing ahead to connect information about people’s online habits together with information about their offline identities, offering certain privacy safeguards in the process.

That year, NextAction changed direction. Recognising the value that traditional data would have in the internet era, the company started building its digital capabilities, took a private equity investment and changed its name to Datalogix to represent its new mission.

“We had an infrastructure to aggregate massive amounts of offline data at a scale that very few other companies did,” Mr Roza said.

The company has spent the last several years quietly building its digital capabilities, considered among the most sophisticated in the industry. Datalogix works with some of the largest marketers and online companies.

This is the way Datalogix tracks a Facebook user. It begins with a user visiting the social networking site and seeing an ad for a product. Facebook passes an anonymised version of that person’s identity to Datalogix, which adds it to a list of users who saw the ad.

Separately, Datalogix works with its more than 1,000 retail partners to track when the people on the list buy a product.

In each case, Datalogix protects the person’s identify by creating a hashed code. That code is then used as a key to match the user who saw an ad on Facebook with the person who bought the particular product. Eventually, Datalogix creates a report that shows in aggregate whether the groups of people who saw a Facebook ad ended up buying that product.

Datalogix says it follows industry self-regulatory privacy standards, that it acts as a middleman so that neither the website nor the retailer see the other party’s information and that people can opt out of the tracking and data collection on its website.

Mr Roza said the industry needs hard performance data in order to capture share from the $65bn TV ad industry.

“People like to oversimplify things and say, do display ads work or do they not?” Mr Roza said. “Online marketing campaigns, when executed well, often perform well and sometimes don’t. There is massive opportunity for improvement.”