Google's 'secret' plans to launch a takeover bid of Tesco's customer loyalty company Dunnhumby, as revealed by Sky News last week, are intriguing. What does the internet giant see in a company that supermarket Tesco is so keen to offload?
Tesco has been trying to offload or close loss-making and non-core units since Dave Lewis tookover as CEO, especially after the accounting scandal that was uncovered shortly after he was appointed.
The disastrous US operation was sold-off at a knock-down price, parts of the Blinkbox online service closed, while other parts were sold, a handful of loss-making UK supermarkets have been closed and, now, Dunnhumby is next up.
Advertising and marketing group WPP was said to be an interested bidder several months ago, but most intriguing of all is the internet from Google or, rather, Google Capital, a growth equity fund backed by the US-based company. But why?
In the mid-1990s, Dunnhumby was thought of as a revolutionary company. It helped to create Tesco's remarkably forward-looking Clubcard back in 1995 and the company has processed the information gathered in order to gain more insight into Tesco's shoppers ever since.
Eventually, Tesco saw fit to buy the company in 2010. It also picked up several other big-name clients along the way, including Proctor & Gamble, Coca-Cola, Diageo and GlaxoSmithKline.
Former Tesco CEO Philip Clarke, who was pushed out last year, claimed that the Clubcard would ensure Tesco always stayed ahead of its rivals. Indeed, part of the rationale behind Tesco's acquisition of Dunnhumby was so that it couldn't work with any of Tesco's rivals and it's unlikely that the supermarket would stop using Dunnhumby's services when it does sell the firm.
A Sky News source suggested that Google was likely to be interested in exploring and adopting some of the data analysis capabilities, which had made it a successful operator of customer loyalty programmes.
But while the data analysis capabilities could yet turn the head of Google - which itself has vast data analytics capabilities - it is likely that the data that could be accrued as part of any acquisition, and the data that will continue to be captured from Dunnhumby customers and thereby consumers, is will be one of the major reasons for any interest from Google.
According to David Cook, a senior associate at law firm Slater and Gordon, the company that acquires Dunnhumby will take control of the data that it has collected over its lifetime. Reports suggest that this could be more than forty terabytes of data.
The data itself, would be split up into three main categories: personal data, secondary shopping data, and predictive or analytical data.
"The predictive or analytical data will relate to an anonymised examination of data trends of a person's data, in combination with other data sources linked together in some way (such as by age or location).
"This data is supposedly anonymised. Personal data is, of course, protected under the Data Protection Act 1998 and the use of that data is somewhat restricted. The secondary shopping data would constitute the raw data or record of the purchase history of that person," Cook told Computing.
The three categories of data have different levels of legislative oversight. Personal data cannot be processed without the consent of the individual in question for using the data in a specific way - but changes in an organisation (being acquired in this case) do not reduce an individual's rights under the Data Protection Act 1998.
Combining data sources
The secondary or shopping data may also be considered personal data if the individual can be identified using a combination of data sources in the possession of the data controller.
For example, if Google uses personal information from someone's Gmail account, YouTube or Google+ and combines it with information that Dunnhumby has about their shopping habits, and then targets that person with advertising or alters their search page results for that person - that would be a breach of the Data Protection Act.
Cook said that secondary or shopping data would almost certainly constitute personal data, in this case, unless Dunnhumby has very carefully split and properly anonymised the data sources. Either way, Dunnhumby should have anonymised data of particular consumers already, before Google (or whoever acquires Dunnhumby) gets their hands on it.
"Although the original data source would have originally allowed Dunnhumby to drill down into the data relating to particular consumers (such as their names, addresses and suchlike), they simply must have removed the identifying features of this data and anonymised it through processing over time. The company acquiring that data is very unlikely to have access to material at that level," said Cook.
So Google, WPP or whoever acquires Dunnhumby could have access to all of Dunnhumby's customers' data - including data that it uses with Coca-Cola - but not the personal data of their customers. That is, unless it seeks individual consent in some way from those users about how it will process their data in future.
"Organisations are unable to infer consent if an individual does not respond to a communication - for example, from a customers' failure to return a form or respond to a leaflet. With this in mind, it would simply not be possible for the purchaser of the Dunnhumby data to unilaterally change terms and conditions and avoid having to seek consent for processing in the manner that they intend," said Cook.
He added that the likes of Google and WPP should also be concerned about the forthcoming General Data Protection Regulation, which would formalise the so-called "right to be forgotten".
"Dunnhumby and future 'owners' of the data sources, may have a headache if the individuals involved start to request that the business ceases using their personal data. That would not only cost the business in terms of manpower to remove the data in question, but would also reduce the value of the data sources themselves," said Cook.
Dunnhumby was originally reported to be valued at about £2bn, but some bankers have suggested that the business isn't even worth half of that sum. The drop in value may well have something to do with the risk attached of acquiring so many data sources - but not being able to fully exploit them.
"The data, of itself and in combinations and subsequent analyses, are the very worth of the company. Ironically, the worth of the company is, in some respects, out of its control," Cook concluded.
You may also like to read this: What does Tesco's sale of Dunnhumby mean for its data strategy?
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