Amid a Changing Privacy Landscape, Prodege Hits Unicorn Status By Helping Companies Monetize Consumer Data
When Apple changed its privacy rules in April 2021 to require that companies get permission before collecting user data online, retailers and digital brands were left scrambling to find new avenues to amass information about shoppers.
The answer may lie in online surveys.
Prodege, a market research and consumer polling startup, attained unicorn status last month thanks to a service that rewards users for completing questionnaires and making purchases on its apps and websites like Swagbucks and MyPoints. The El Segundo-based company then sells information about shoppers’ habits and preferences back to market research firms and retail clients such as Walmart, Clorox and DoorDash.
“We get the member—the consumer—to give us their permission to have a quid pro quo,” said Prodege Chairman and Chief Executive Officer Chuck Davis, who was named CEO in 2014 and previously held the same role at movie ticket retailer Fandango and ecommerce website Shopzilla.
Founded in 2005 as a charity donation platform, the startup pivoted a year later to launching search engines for entertainers and sports teams. In exchange for using the search engines, consumers were entered in raffles to win merchandise. In 2008, Prodege introduced its first rewards site, Swagbucks, which gives cash back to members for filling out surveys, buying gift cards, and shopping at some 1,500 partner retailers. The company has since acquired six similar platforms, and has doled out a total of $1.8 billion in rewards to an audience of 120 million registered members.
Recent years have seen Prodege go on a buying spree as it has looked to grow its audience footprint. In 2020, it bought Massachusetts-based Upromise, a platform for cash-back rewards in the form of a 529 college savings plan. Earlier that year, it snapped up the Santa Monica-based coupon-cutter company Coupon Cause, which works with retailers like Target and Amazon. YSense, which it acquired in 2019, compensates users for testing new services and watching product videos.
In December, the company announced a “major” investment from Boston-based private equity firm Great Hill Partners. Though both Great Hill and Prodege declined to disclose details of the transaction, sources with knowledge of the deal confirmed that it valued Prodege at north of $1 billion.
“More and more, there’s recognition from consumers that their data and their attention and time is worth something,” said Prodege founder and President Josef Gorowitz. “There are trillion-dollar companies built off of it and [consumers] now see the opportunity to leverage that and take some of that home.”
But the other half of Prodege’s business is built on understanding consumer behavior—polling users about their habits and analyzing that data for brands. For example, Prodege members earn a $15 reward for subscribing to Dollar Shave Club, the Marina del Rey-based grooming product delivery service. Prodege can then survey those new customers and send the results back to Dollar Shave Club to build a clearer picture of its consumer base.
And soon, with a new on-demand desktop app, corporate clients will have direct access to the Prodege audience to design and host campaigns. It’s a strategy that could become the norm as advertisers struggle to reach consumers they once could monitor almost instantly.
“It’s not surprising that a company like Prodege is thriving in this environment,” said Allison Schiff, managing editor of AdExchanger, a digital advertising analysis website. Schiff noted that many new startups, in particular, are looking to join an industry built on the idea that consumers are willing to share personal information in return for some type of reward.
That service has only become more valuable as tech companies continue to alter the privacy landscape. Last spring, Apple introduced its App Tracking Transparency feature, which displays an alert for users to consent to being tracked online. The change meant that many brands and advertisers would lose access to shoppers’ browsing activity and which discounts or promotions led to them making a purchase. Google, meanwhile, has also announced plans to ban third-party cookies from its Chrome web browser.
Of the iOS users running Apple’s updated software, 38% are opting-in and 62% are opting-out of data sharing, according to an October report from marketing analytics company AppsFlyer.
“The gold standard of data is behavior,” said Tina Moffett, principal analyst of business-to-consumer marketing at Forrester Research. “That pipeline is getting cut off by data deprivation and privacy-preserving measures.”
Moffett said she expects more marketers will turn to surveys and polls given the privacy protections. What they’ll miss out on is behavioral data—how long consumers spend looking at a product, or which items get paired together in their shopping cart.
Not that Prodege is complaining. The company takes around 5% from each purchase made on any of its seven platforms. In 2021, it pulled in roughly $300 million in revenue and added about 3,800 new clients.
“Brands buy into it—they’re happy to share instead of putting it all into Google’s profits,” Gorowitz said. “It builds a relationship with the consumer and they feel more comfortable sharing their data, their opinions, their time.”
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'They're Being Sued All Over the Place.' TikTok Comes Under More Scrutiny Over Children's Privacy Concerns
A coalition of child privacy protection advocacy groups filed a complaint on Thursday with the U.S. Federal Trade Commission against TikTok.
The complaint presents evidence to the regulatory body that the popular social media app is violating the Children's Online Privacy Protection Act (COPPA) and flouting terms agreed to following a previous investigation into similar violations. That affair resulted in TikTok being fined $5.7 million in 2019 by the FTC – a sum that sources tell dot.LA was at that time the largest amount ever levied by the Commission.
The complaint states that under those terms, issued via consent decree, "TikTok agreed to...destroy all personal information collected from users under 13 years of age. In fact, however,...we found that TikTok currently has many regular account holders who are under age 13, and many of them still have videos of themselves that were uploaded as far back as 2016."
Moreover, contrary to the agreed-upon terms, "TikTok fails to make reasonable efforts to ensure that a parent of a child receives direct notice of its practices regarding the collection, use, or disclosure of personal information. Indeed, TikTok does not at any point contact the child's parents to give them notice and does not even ask for contact information for the child's parents."
A TikTok spokesperson said in a statement that the company takes privacy "seriously and (we) are committed to helping ensure that TikTok continues to be a safe and entertaining community for our users."
The company said it has put in place "view-only" TikTok experiences for users who are under 13 in the U.S., which bars them from sharing personal information and "extensively" limits content and user interaction so that they cannot share videos, comment on videos, message users, or maintain a profile or followers. But, of course, that is dependent on the user not lying about their age.
The company is vague about how that information is shared, but does note on its website that it's shared with the company's "corporate group and service providers as necessary for them to perform a business purpose, professional service, or technology support function for us."
Culver City-based TikTok, which is owned by Beijing-based technology firm ByteDance Ltd., has received much scrutiny from the national security community. The app is no longer allowed on Australian Defense Department devices following a similar ban by the Pentagon due to national security concerns surrounding China's potential access to data. ByteDance has said that all U.S. user data is stored in the United States and Singapore, not on Chinese servers.
But TikTok's legal issues don't stop there.
"They're being sued all over the place," noted Cynthia Cole, special counsel at Palo Alto-based Baker Botts, specializing in data privacy and technology. "This is just the beginning."
Just this year, regulatory authorities have reportedly called for separate investigations into TikTok regarding privacy concerns in Colombia, the Netherlands and Italy. In the U.S., TikTok is currently fighting multiple class action lawsuits.
On Monday, a bipartisan group of senators urged the FTC to investigate the "collection and processing practices" of companies that market to children on the internet as it reviews the COPPA rule to ensure privacy safeguards are effective for kids online today.
The letter by Sens. Edward J. Markey, D-Mass., Josh Hawley, R-Mo., Richard Blumenthal, D-Conn, Bill Cassidy, R-La., Dick Durbin, D-Ill. and Marsha Blackburn, R-Tenn., was sent as the skyrocketing use of technology amid the COVID-19 pandemic prompted the FTC to fast-track its scheduled review of COPPA.
The letter noted that "children are a uniquely vulnerable population that deserve heightened privacy protections. The FTC should take extreme caution not to weaken – either purposefully or inadvertently – privacy protections under COPPA."
What Happens Now?
"The FTC will likely investigate, and if they do find that TikTok didn't adhere to (the consent decree), then there will be an additional fine that will be much more punitive," said Cole. She also noted that the regulatory body may be politically motivated to come down hard, in order to show their importance and make a case that they deserve more funding and authority in the future.
The FTC can fine up to $42,350 per violation, which in this case would be each user under the age of 13. It's unclear how many of TikTok's some 160 million users in the U.S. are underage.
And it could get even worse for TikTok. The havoc that the COVID-19 crisis has wrought on municipal coffers, Cole noted, could be "pretty significant motivation for states to bring their own actions."
California, which on January 1 of this year enacted the California Consumer Privacy Act (CCPA), is a prime candidate. That legislation will start being enforced July 1.
"This paves the way for CCPA enforcement," Cole said. "This could be an easy win for (California's Attorney General)."
And with a public paper trail, TikTok could become a relatively easy target for an ongoing spiral of litigation.
"This is the tip of the iceberg," said Cole.
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