EVA ASCARZA HARVARD BUSINESS | SCHOOL 9-521-058 REV MAY 3, 2021 AYELET ISRAELI Amazon Shopper Panel: Paying Customers for Their Data On October 20, 2020, Amazon quietly announced that it would roll out a new program wherein it would pay customers for their shopping data, calling it the Amazon Shopper Panel. As part of the program, participating Amazon customers would send in their itemized receipts, from non-Amazon suppliers (Whole Foods and other Amazon brands would not qualify) to receive a credit from the company in return, all through an app on their phone (see Exhibit 1). The Amazon Shopper Panel was an invitation-only, opt-in program available for customers in the United States that would allow them to earn either a $10 Amazon credit or the option to make a $10 charitable donation through Amazon from a list of pre-selected charities. In order to receive a reward a customer must submit ten eligible receipts in a month and they would also have the opportunity to answer surveys about their purchases which could grant them additional rewards. The motivation for launching such a program, Amazon revealed, was to better support sellers and brands while also providing insights from beyond the Amazon store. The new program immediately got media attention, especially in light of the company's recent controversy on whether it collects proprietary data from their sellers to foster anticompetitive business practices (see Exhibit 2). As the TechCrunch article that first announced the program stated: The program's launch follows increased scrutiny over Amazon's anti-competitive business practices in the US and abroad when it comes to using consumers' purchase data. Amazon came under fire from US. regulators over how it had leveraged third-party merchants' sales data to benefit its own private label business. When Amazon CEO Jeff Bezos testified before Congress in July, he said the company had a policy against doing this, but couldn't confirm that policy hadn't been violated. The retailer may also be facing antitrust charges over the practice in the EU. This sentiment was shared among several other outlets, including Gizmodo, who was rather explicit about Amazon's (believed) intentions with the program? After spending years promising Congress that the data it collected from third-party sellers wasn't used to beef up its private-label products, today Amazon decided to roll out a product [to] achieve a similar end from a different angle. The Amazon Shopper Panel, as it's called, promises to pay Amazon customers that offer intel to the ecommerce giant Professes Eva Acara and Ayelet liseli prepared this case. This case was developed from published sources Funding for the development of this case was provided by Harvard Business School and not by the company. 1885 cases are developed solely as the basis for class decussion Cases are not intended to serve as endorsements, souces of primary data, or illustrations of effective or ineffective management Copyright 2021 President and Fellowes of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7 write Harvard Business School Publishing, Boston, MA 0216, or go to www.hbsp harvard edu. This publication may not be digitized, photocopied or otherwise reproduced, posted, or trammitted, without the permission of Harvard Business School This document is authorized for use only in CHEN Yunging's PriMarketing at Xiamen University from Feb 2023 to Jul 2023 521-058 Amazon Shopper Panel: Paying Customers for Their Data about where they shop when they're not shopping on Amazon dot com. While Amazon still doesn't collect non-public seller data, this new program is designed to get that information anyway-this time from you, the customer. ... Because Amazon doesn't have access to the same purchase-by-purchase data from the myriad brick-and-mortar "sellers" that Amazon competes with offline, paying people for their receipts from these sellers ensures Amazon will have a steady stream of data from its IRL competitors. Whenever we feel comfortable walking back into movie theaters, our AMC receipts can be used to fuel new exclusives on Amazon Prime. Our receipts from our occasional grocery runs can be used to tell Whole Foods which products it should ramp up or abandon. Some consumers were wary about sharing their information, one consumer commented on the TechCrunch article: "Hey consumers, just know that when you snap that photo of your receipt you are sending Amazon the lat/long coordinates of your phone and also consenting your device ID for tracking and targeting ads. Hope you are OK with that... to which another responded: "For the money? That's fine with me. I've been doing the same with Google Opinion Rewards for a while now." Researchers that estimated the value of consumers' data found that an email address is worth $89 for a brand, while the data generated from an adult on the web was valued at $35 per month. After a data breach, Comcast paid each customer whose private data was compromised $100.* Not all of the media reports were negative; some reports indicated a positive reception to the announcement. For starters, customers would be rewarded for their effort. Soon after launching the program, Amazon created a waitlist for customers (who had not been originally invited) to join the Panel. Interested customers could download the app, join the waitlist, and when new space become available, they would receive an email from Amazon with their official invitation to join. Moreover, participation on the Amazon Shopper panel was voluntary. Not only did customers choose whether to accept Amazon's invitation to join the panel, they also chose what they want and don't want to share. The Panel would also allow customers to omit aspects of their receipts and remove uploaded receipts at any time. The company also stated that it would delete any sensitive information, such as prescription information from drug store receipts. To further emphasize their commitment to customer privacy, the Amazon Shopper Panel 'Privacy site stated that "[W]e will never share any personal information collected via the Amazon Shopper Panel with third parties." Rather, Amazon said that the collected data would be used to help advertisers better understand the relationship between their ads and purchases at an aggregate level-a goal that was very much aligned with the company's increasing investments in its advertising business. In Q1 2020, Amazon's advertising business grew by 44% year over year, a much greater rate than Google (13%) and Facebook (17%). By the end of 2020 Amazon was the number 3 publisher in the US, reaching 10% of digital advetising, behind Google's 29%, and Facebook's 25% The company also said that the data collected from these receipts would help Amazon "better support sellers and brands by also providing insights from beyond our store" (see Exhibits 3 and 4 for excerpts from the Amazon website). The data revolution Companies have always collected data about customers. Catalog and coupon companies had been collecting data long before Jeff Bezos was born, personalizing offerings to each customer based on their historical purchases. Since the late 1990s (with the mainstream adoption of the internet) firms' ability to collect, process, and leverage customer data skyrocketed. Thanks to the wide availability of data. 2 This document is authorized for use only in CHEN Yunging's Parking Xmen University from Feb 2023 to Jul 2023. Amazon Shopper Panel: Paying Customers for Their Data 521-058 firms became more sophisticated in their use of predictive analytics. In 2012 Target, the US-based department store, made it to the headlines for (correctly) predicting that one its customers was pregnant based on her past purchases. In 2009 Netflix, the content platform, launched a competition whereby they shared millions of customers' ratings among anyone who could help them predict what shows individual customers would enjoy. Similarly, Amazon enhanced the user experience in their retail website, showing shoppers products that they would most likely be interested in, based on each user's past searches and purchases. By 2020, the large majority of firms, Amazon included, not only collected customers purchases and interactions with the focal company-as was historically the case-but also tracked their online. behavior, their location, their social media contacts, or even their conversations. One of the most common forms of collecting data was via cookies, which were simple text files stored in the user's device by the web browser. Cookies were created in the mid 90's to help early e-commerce sites have insights into the customer experience-a gap in knowledge that was leaving them at a disadvantage to the brick and mortar stores where most customers purchased at that time. Within the course of three decades, cookies became ubiquitous and grew their use cases, from allowing the focal website to know if the customer had logged in (via "authentication cookies") to allow cross-site tracking via "third- party" cookies. Unlike first-party cookies which are created and controlled by the web domain the user visits, and cannot be read by other sites - third-party cookies allowed a technology solution that was originated in one domain to collect data from many other sites (note, however, that this data was limited to browsing behavior). This characteristic made cross-site tracking, retargeting, and advertising measurement possible. A variety of companies that collected (either primary or secondary) data on consumers, also traded it with other companies. While in the old days, customers' zip codes and locations were used for segmenting and targeting, the rise of smartphones and wearables intensified the specificity of location-based data and enhanced the use of user location by companies (see Exhibit 5 for information about how companies collect those data). For example, companies used geolocation to increase sales-eg, a beverage brand can target consumers in real-time when they visit a venue that stocks their products, or they can also promote their healthy drink after they visit a gym-to encourage customers to switch brands-eg, a bank could target customers who regularly visit a branch of the competitor bank with a better offer-or to increase personalization in advertising by segmenting the ad audience based on location data. Privacy and the regulatory environment Without doubt, the availability of customer data made it easier for marketers to enhance the user experience and to display more relevant advertisements to more relevant audiences. However, as data availability has risen, so have consumers' concerns. There was a total lack of transparency about the ways in which some companies were using third-party cookies, with the vast majority of consumers not even realizing that their behavior was tracked across websites. A 2019 survey conducted among US-based consumers found that 65% of them did not know which brands were using their data. Privacy concerns rose further amid articles uncovering how different branches of government would use consumers location data collected by regular commercial apps. In June 2020, the Wall Street Journal reported the IRS effort to use (anonymized) cellphone movement data collected by third-parties to identify individuals. Later that year it was discovered that the US Military had allegedly bought location data from ordinary apps, including a Muslim prayer app with over 98 million downloads." While all these location data were, in principle, anonymized, recovering the identity of individuals was often straightforward using, for instance, their location at night to disclose individuals' home address, or their regular daily location to match with their workplace. This document is authorized for use only in CHEN Yunging's PrinMarketing at Xiamen University from Feb 2023 to Jul 2023 521-058 Amazon Shopper Panel: Paying Customers for Their Data As with many technology advancements, current laws and regulations lagged behind on data privacy issues. Governments around the world started trying to add transparency and to give consumers control over what information would be shared online. Responding to the increasing concern about the use of third-party cookies, Europe's General Data Protection Regulation (GDPR) determined that users must actively consent to all cookies when visiting a website; otherwise, the website could not track, or use, any of the user's cookie data. Similar policies followed also in the USA, with the California's CCPA data privacy law and Maine's Internet privacy protection bill among the most restrictive in the nation. In August 2019 Google announced that it will phase out the third-party cookies on Chrome browsers, leaving marketers a few years to adjust to such a change. In June 2020, Apple announced a move that will reduce advertisers ability to track consumers across apps and websites. In March 2021 Google clarified their plans and shared a plan by which they will stop selling ads based on individuals' browsing across multiple websites. Instead, they will use technologies to target ads based on aggregated groups of users with similar interests. While Google and Apple took measures to limit user tracking, Facebook argued that individualized ad targeting which will be limited given these new measures is especially benefitial for small businesses, 12 The future of customers' data This inevitable move towards "first-party" data meant that marketers had to reimagine their approach to market research, digital advertising measurement, and overall customer experience. As Gary Hawkins, founder and CEO of the Center for Advancing Retail & Technology, noted:13 There's something to this idea that a retailer can vacuum up all sorts of data, not only on their own customers, but on people in their market areas that are not customers, and intelligently go after them. I think Amazon is sort of early going down that path, but it's no big surprise... Amazon can ratchet that up or down as they see the need to, but I think it begins to open the door to this notion about paying the shopper for use of their data. And I think we're going to see more of that, especially as we see more states roll out privacy laws like California has done. And I know of some startups that are working in this space, creating a capability for a consumer to control their data and only release it to companies that they want to, or that they want to do business with. Does the Amazon Shopper Panel represent an opportunity or a threat to consumers' control of their privacy and data? Should consumers line up and add themselves to the waitlist or sit this one out? What is the larger impact this could have on the market, given Amazon's huge presence? This document is authorized for use only in CHEN Yunging's PrinMarketing at Xiamen University from Feb 2023 to Jul 2023