What Stays in Vegas (15 page)

Gupta included whatever categories made sense from a commercial standpoint. For example, he says, he would not have had a problem listing that someone suffers from HIV. Yet with fewer than 1.8 million Americans in that category, he says, there is not enough marketing demand, so he does not include such information.
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In 1992, Gupta took his company, then called American Business Information, public. His wealth led to greater social prominence. He
donated generously to both Bill and Hillary Clinton's political campaigns and was invited to spend the night in the White House's Lincoln Bedroom, a perk shared with top donors and friends. He appeared on
60 Minutes II
to explain data broker lists. After Bill Clinton left office, he hired the former president to consult for his company at a cost of $3 million over several years.
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Gupta traveled on a corporate jet and enjoyed a life of luxury. Eventually he sold his company, which was later renamed InfoUSA, for $680 million in 2010.
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By then he and his family had homes in Omaha; Aspen, Colorado; Washington, DC; Miami; Yountville and Hillsborough, California; and Maui and Kauai, Hawaii.
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His high living attracted the attention of federal authorities. In 2010 the Securities and Exchange Commission charged him with milking his former company for $9.5 million in unauthorized perks between 2003 and 2007, including personal use of jets to Italy, the Virgin Islands, Cancun, and other places, as well as billing for expenses related to his yacht, a winery in Napa Valley, twenty cars (including a Jaguar, two Mercedes, and a Hummer), life insurance, credit cards, twenty-eight club memberships, and other expenses.
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“Gupta stole millions of dollars from Info shareholders by treating the company like it was his personal ATM,” said Robert Khuzami, director of the SEC's enforcement division.
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Gupta agreed to pay millions of dollars to settle the case but did not admit or deny the allegations as part of the settlement.
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After selling his company in 2010, Gupta formed DatabaseUSA, which continues to compile data. The service lists one hundred million cell phone numbers.
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Despite so many years of work in direct marketing, or perhaps because of it, Gupta is contemptuous of many in his field. He says about half of today's list brokers are “shysters” cutting corners or lying about the quality of the personal data they are selling. “They are basically like traitors,” he says. “They never tell the truth, you know. They claim to be like a multi billion-dollars company and at the home they only got one employee.”

The DMA

Many of the firms arousing Gupta's ire gather every year at a convention hosted by the Direct Marketing Association, the leading industry group, whose roots date back nearly a century. The event, held in 2012 at the Las Vegas Mandalay Bay Hotel, celebrates data gathering and capitalism. Data merchants set up booths in a vast convention center. Even as they try to find new clients for their lists of consumers, they continue gathering data on one another. Some sponsor old-fashioned raffles, encouraging visitors to plop their business cards into a bowl for a chance to win a prize. As I approached one businessman's booth, he asked if he could scan my convention badge. The matrix code contained my name, address, phone number, and email.

Different brokers advertise different specialties. A company called T5 Healthy Living asks people to share intimate details via online surveys on subjects such as constipation, bipolar disorder, depression, cancer, and other conditions. Participants “receive information and exclusive offers with valuable coupons and savings on the latest products available.” One question asks if you or a partner have had a sexually transmitted disease. The end of the form asks users to confirm: “I authorize T5 Healthy Living and its trusted third party partners to use my personal and household information to send email, postal, and valuable information to me.”

Another broker even sold lists of the deceased. In Nikolai Gogol's satirical novel
Dead Souls
, the protagonist buys identities of those who have passed on to boost his apparent wealth and standing. That was not the goal of Omaha, Nebraska–based CAS Inc. It wants to improve clients' chances of selling to the living by purging the names of others in the household who have died. “Sending direct mail to the recently deceased adds insult to injury for the remaining members of a household,” a company brochure said. “Not only is this practice bad manners, but it is also bad for business.”

The US Postal Service has a large display stand at the convention, advertising its services to update addresses for direct marketers when people move.

One conference highlight is the DMA head's keynote speech. In 2012, with Congress and the Federal Trade Commission stepping up scrutiny of data brokers, DMA acting CEO Linda Woolley struck a fiery tone as she rallied thousands of gathered marketers in a large ballroom.
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She said firms spent $168.5 billion on direct marketing in 2012, which generated more than $2 trillion in incremental sales—nearly 9 percent of US gross domestic product.
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“Our data-driven world is a better world,” declared Woolley, a former consultant and lobbyist. “It's not just that we have big data, it's that we are using it to give customers what they want.”

Then she portrayed a dark future in which the Federal Trade Commission and “privacy zealots” had gotten their wishes and persuaded Congress to bar the collection of personal consumer data without their permission. The nightmare-scenario law would bar Internet tracking and prohibit the use of public records to gain insights. “Consumers even have the right to say: ‘My marketing data is mine, and it's private, and you can't use it or sell it,'” she said. Woolley's vision aimed to rile up the crowd much as talk of a new prohibition might horrify a convention of brewers. “In this picture of the future, marketers didn't fight back hard enough, and the FTC and the privacy zealots got this bill passed,” she continued. “Is this the picture of the future that you want? Of course not!”

She closed her remarks by leading the crowd of several thousand in a chant of “We are DMA! We are DMA!”

One developing area of marketing on display at the annual DMA conference is marketing through racial targeting. The field is attracting some interesting entrepreneurs who are making new uses of big data. After immigrating to the United States from India in 1997 at age thirteen, Ajay Gupta became fascinated by the important role minorities played in politics. He ultimately started developing software to identify the ethnic origins of millions of Americans from their names and other clues.

In high school in San Francisco, he taught himself computer coding by helping to develop a website on professional wrestling. He studied financial economics and creative writing in college and graduate
school, but saw better career opportunities in big data and formed his company, Stirista, after his 2008 graduation. He bought lists of registered voters across the United States, and cross-referenced names with those on the rolls in eight southern states that also listed ethnicity. Using this and other data he could eventually predict ethnic origins and religions for most names and could discern unusual patterns. For example, of Ann Smiths, he detected that about three-quarters are white and the rest black. But 70–80 percent of Annie Smiths are black.

Gupta learned as well about the need for multiple clues such as combinations of first and last names, ZIP codes, and other details. A surname like Sen could be Bengali or Scandinavian. Das could be Indian or German. “What is the most challenging is when you have a name like Obama. There are only going to be about twenty people in the country with that,” he says.

As he built his database, big companies started buying the data and his software. Cable operators including Dish Network, Time Warner, and DirecTV promoted Russian, Hindi, Chinese, and other foreign-language channels. Phone and VoIP telephony providers appealed to emigrants with ties to the old country. For example, Vonage could directly advertise very specific offers such as three thousand minutes a month to the Philippines for one cent a minute.

Ever more detailed personal data allows well-known names in retail, finance, health care, and other fields to tailor messages to different ethnic groups. McDonald's, T-Mobile, Diageo (distiller of brands such as Johnnie Walker whisky and Guinness beer), Wells Fargo, Blue Cross Blue Shield, and Procter and Gamble have all embraced what they call multicultural marketing.

Throwing away notions of a color-blind American society in a giant melting pot, data scientists and entrepreneurs like Gupta have stepped up efforts to use big data to segment customers into ethnic, racial, and religious categories. This ability is one of many areas in which marketers are gaining ever more intimate insights about customers who typically are unaware such information is being gathered.

“There was a sense that people came here and they were expected to take on the American culture, so you marketed to them as that. And
now there may be a growing awareness that people maintain their ethnicities,” says Donna Lillian, president of the American Name Society, a group of a few hundred experts who specialize in the study of US names.

For Stirista, a San Antonio, Texas–based startup where top executives include Gupta's wife and mother-in-law, this awareness has translated into rapidly growing revenue. It expected to bring in $3 million in 2013, up from $1.4 million in 2012.

Such targeting may be as simple as swapping ad photos to show a different ethnic group. Other times the message varies to reflect cultural sensitivities, a practice the American Heart Association embraces. “In certain cultural groups there is a certain guilt or lack of trust in working with their doctors,” says Gerald Johnson II, the group's chief diversity officer and senior vice president. “There are the cultural nuances that say that messaging would be different.”

In other cases, marketers will only target certain ethnic groups. “If I send out twenty thousand emails just for a Hispanic grocery store, for example, the response is not necessarily that great,” says Lynwood Shackelford, director of sales for the Washington Suburban Press Network, which helps firms with marketing. If they can narrow that original mailing list to just Hispanics with the right messaging, the ad may deliver ten or twenty times better results, he says. In another campaign, he promoted a new Native American museum to people of that heritage.

Direct marketers have gathered information about ethnicity, race, and religion for decades, but advances in computing allow ever greater sophistication in modeling a person's likely origins, as well as details such as whether someone is a first-generation immigrant likely to speak a foreign language. Before the 1990s such marketing was often based on surnames or ZIP codes, with religion assigned based on broad assumptions (for example, designating those with Italian surnames as Catholic).

“There was a lack of trust and common knowledge that compiled lists through inferred information were not accurate,” says Peter Brownstein, former chief information officer at Ethnic Technologies,
a leading ethnic data broker and processor. Today Ethnic Technologies uses multiple sources of information to predict 95 percent of the names it encounters. “As that marketing method evolved, they started looking at geography, neighborhood analytics,” says Karen Sinisi, director of sales.

Today, large data brokers such as Acxiom buy ethnic data and related software from companies such as Stirista and Ethnic Technologies, making the data widely available to marketers. Gupta says his program starts out by seeking matches to the five hundred thousand most common US surnames that make up about 70–80 percent of the nation's total. Another five hundred thousand surnames account for everyone else, he estimates. For less common names, his team studies emigration and government records for clues. First names help determine if people are first- or second-generation immigrants. US-born citizens are likely to have Americanized names, with the exception of Indians, he says. Some marketers also rely on self-reported ethnic data from surveys, but Gupta says people do not always answer truthfully.

On its website, Stirista shows how it can supplement basic information about a customer. Jennifer Pham? A Protestant of Vietnamese ancestry who speaks Vietnamese. John Washington in Palmetto, Florida? A Protestant African American. Marshall Begay? A Catholic Native American Navajo. Sometimes the first name contains the decisive clue.

The software is predictive, which means it is not always right. Both Stirista and Ethnic Technologies said their software would likely wrongly guess that Barack Obama would be a Muslim of Kenyan extraction. Stirista predicted that I would be Western European, “typically English or German.” They were a few countries off, and missed the Italian half of my heritage, obscured when my mother, with an Italian surname, married my father. It suspected that American Name Society president Donna Lillian was of Irish ancestry. She does have some Irish, but also English, Scottish, and a dash of Native American heritage.

Political campaigns also increasingly use ethnic data. “In politics it's like marketing on steroids. So you've got a one-day sale where you have to get all the shoppers to the store,” says John Phillips, CEO of Aristotle, which uses personal data to help US and foreign candidates.
“Political marketing based on ethnicity or nationality is increasingly important.” He cites campaigns in India, Mexico, Tunisia, and elsewhere where nationals living abroad are a vital source of both donations and millions of votes.