What Stays in Vegas

by Adam Tanner

  At first Instant Checkmate did not feature Kibak’s name or image. By 2013 the site for thecontrolgroup.com, which says it developed Instant Checkmate, began including photos of staff members with more information about the company.41 The front-page photo of the site shows Kibak and the staff, almost all in shorts, on a beach on a cloudless day above a banner headline that reads, “The Control Group—Developing Good Times.” The company also generated positive publicity in the San Diego area by sponsoring a local beach cleanup and other events.

  To drive traffic to its site, Instant Checkmate also turned to third-party affiliates. Such marketers have an incentive to grab attention because they are paid only when someone clicks an ad or email and becomes a customer. Some sent out provocative emails, sometimes in stilted English. “I just found out my new babysitter is a thief !” one email said. “Is the report I listened to legitimate? Your friend informed they conducted a criminal check on your aunt and it showed they have a felony. Just click this link to read it and see.”

  Kibak has distanced himself from such messages, saying they were sent by third-party affiliate marketers who used techniques he does not approve of. “Instant Checkmate would not create or send emails of that nature, and those emails absolutely violate Instant Checkmate’s policies,” Kibak said. “My best guess is that the emails were created and sent by an unscrupulous third-party affiliate advertiser. To reiterate, we do not condone this in any way.”42

  Real money is at stake for affiliates who win new clients. In March 2014, for example, one affiliate site promised payment ranging from $18 to $29.50 per Instant Checkmate lead that resulted in new customers.43 Another site referred to a previous rate of $22.75 per lead.44 The company also offered a special incentive to its top producers—a trip to Dubrovnik, Croatia, for the “publisher who generates the most revenue running Instant Checkmate offers between February 1–June 30, 2014.”45 The contest was aimed at a sporty crowd with the lure “to sail, cliff jump, paddle board and jet ski.”46

  Kibak points out that Internet companies routinely use third-party affiliates, and many well-known businesses such as Netflix and Amazon have used such services to help find new clients. “I believe we do a good job in making sure that third-party affiliates only send approved emails,” he said. “When we learn that a third-party affiliate has sent emails that we do not approve, we take swift action to ensure the third-party affiliate no longer works with Instant Checkmate.”47

  One such instance occurred in early 2012 when a Facebook ad briefly ran showing a dark-skinned man with small beady eyes, thick elongated lips, a massive nose, and a pointy head. He wore what appeared to be an orange prison jumpsuit: “You Can Now See Arrest Records of Anyone! Click Here to Search!” “We did not create that ad and were not aware of its existence until we read a blog post about it, at which time we immediately demanded the ad be taken down,” Kibak says.48

  As Instant Checkmate grew, it typically quoted a spokesperson, Kristen Bright, in company statements. All efforts to reach her over many months led to dead ends. No returned calls. No emails. Public record searches for her did not produce an obvious match. Was she an especially shy spokeswoman—whose job was, after all, to talk with the outside world? Or was she a fictitious corporate creation, like Betty Crocker or Aunt Jemima?

  Instant Checkmate also gained prominence for its Google ads in a very competitive marketplace.49 Like the Monahan brothers, Kibak and his team placed Google ads on millions of names, which meant an ad for the company’s services would often pop up when someone searched for a particular name. The company invested enough so that its messages would often appear on the screen above those for PeopleSmart and other competitors. At times the ad message would ask if the individual had been arrested, such as “John Doe, Arrested?” Google ads lie at the heart of the search company’s business, generating billions of dollars in annual revenue.

  Shock Value

  In 2012 and 2013, Instant Checkmate’s success continued to grow.50 The upstart surpassed PeopleSmart in web traffic. It expanded its staff and in 2014 moved into new corporate offices in San Diego.51 Yet data brokers more broadly were going through a turbulent time. Congressional committees and the Federal Trade Commission stepped up examination of industry practices. Some called for more regulation. Computer programmer Thomas Lowrey IV, who worked at Instant Checkmate, believes the personal data industry is in desperate need of a legal overhaul. He wonders why companies that cannot guarantee the accuracy of their data are allowed to stay in business. “Most of these companies try to market themselves as a tool to assist in discovering more about people you don’t trust,” he says. “The problem is, how can anyone trust these companies themselves when they practice extremist marketing and exploit people’s lack of trust for one another?”52

  Kibak strongly disagreed with the assessment, calling Instant Checkmate “a due diligence or precautionary tool.” “The quote above is like saying that ADT Home Security systems or manufacturers of locks for doors—are ‘exploit[ing] people’s lack of trust for one another.’ Obviously that’s not true—those companies, like Instant Checkmate, provide tools that people can use to protect themselves.”53

  Another complaining about Instant Checkmate’s approach was Meagan Simmons, a Florida woman whose mug shot appeared in an ad for Instant Checkmate beside text that read: “Sometimes the cute ones aren’t so innocent.” She filed a lawsuit in 2014.54

  “The ad contained her arrest booking photo and did not identify her by name,” Kibak said. “There is greater freedom under the law with publishing public records, like arrest booking photos, because this is a matter of public interest and the photo is not owned by the person arrested. We also did not suggest that she was endorsing or a spokesperson for Instant Checkmate. In any event, we are defending the lawsuit and are no longer running the ad.”55

  A month after that lawsuit was filed, an even bigger blow hit Instant Checkmate. The FTC charged the company with violating the Fair Credit Reporting Act by advertising its services to users including landlords and employers. The complaint alleged the company did not take reasonable steps to ensure the reports were accurate or that those coming to the site had a permissible reason to receive such reports.56

  How Instant Checkmate advertised its services, both on its site and on Google, proved key to the case, as outlined in a March 21, 2014, complaint that noted: “The company, through its Google Ad Words ad campaign, ran advertisements that would appear in search results when users sought background checks on ‘nannies,’ ‘babysitters,’ ‘maids,’ and ‘housekeepers.’”57 It also quoted from Instant Checkmate’s website: “GOOD REASONS to get instant criminal checks on anyone right now. . . . (2) Check out tenants before they rent.”

  The company issued a statement referring to “a technical violation” of the Fair Credit Reporting Act. “The FTC recognized that Instant Checkmate is a responsible company and agreed to a settlement where Instant Checkmate did not admit liability,” it said. “The few ads that concerned the FTC ran briefly over two years ago and are not representative of Instant Checkmate’s advertising.”58

  Instant Checkmate agreed to settle the case and pay a fine of $525,000.

  Matthew Monahan says it is a challenge to compete when rivals or marketers working on their behalf attempt to stir up fear when advertising their products. “When you say things like, ‘Your neighbor may be a sex offender, find out the shocking truth, click here and see the mug shot photos,’ you create their whole entertainment, shock-value kind of approach. It drives a lot of eyeballs, it drives a lot of curiosity,” he rued.

  Caesars faced a similar dilemma in Las Vegas. Could they ignore outside supplementary personal information from data brokers when their rivals aggressively used such insights for marketing? Unlike the Monahan brothers, who had a cushion of cash for long-term investment, Caesars did not have the luxury of time after the financial crisis. With a massive debt load, the casino chain faced more urgency in boosting revenue. Rivals such
as Wynn were using raw public records on Las Vegas weddings to market directly to newlyweds. But a different type of data broker working directly with businesses offered far more sophisticated insights, sometimes thousands of pieces of information about any one person.

  7

  Direct Marketing

  How Would You Like to Earn $10,000 in a Summer?

  After enrolling at Wesleyan University in 1993, Joshua Kanter returned home to New Jersey for the first time over Thanksgiving. His mother had gathered his mail into a four-inch stack, most of it junk. One envelope grabbed his attention. “How would you like to earn $10,000 in a summer?” a bold headline from University Painters asked. Working the summer before college had brought in only $1,200, not enough to fulfill Kanter’s dream of buying a car.

  At that time University Painters sought out college students in certain ZIP codes so it could target key markets. To find the right entrepreneurially minded youth, the company rented lists of students at universities within a few hours of their family homes. Kanter did exactly what the direct marketer intended: he called University Painters to find out more. He learned that the company would grant him a house-painting franchise in exchange for 26 percent of sales. He received choice terrain to test his business acumen: Princeton, New Jersey, a prosperous town with strong business potential.

  Kanter started returning home from Connecticut on weekends to knock on doors with the offer of free house-painting estimates. The teenager might have deterred some potential customers with his shoulder-length hair, but he showed energy and sincerity. People sensed he was a good kid and responded positively to his sales pitch. Over summer break, he went into overdrive, making the rounds and organizing his growing enterprise ninety to one hundred hours a week. Occasionally he pitched in and painted, but he focused on finding new clients and training employees.

  University Painters’ direct mail pitch far underestimated Kanter’s actual earnings. The first year he piled up $45,000. The second year, after getting a conservative haircut and suspending his studies for a year, he really hit the jackpot, earning $105,000. He bought his first car, a maroon 1982 Honda Prelude that had already journeyed 250,000 miles. Kanter had become a convert to the magic of direct marketing. Less than two decades later he would help lead a massive direct-marketing operation at Caesars that sends out 750 million offers a year.

  The founder of University Painters, Joshua Jablon, found Kanter’s name through a data broker called American Student List. Now part of ASL Marketing, the firm rents lists of students and recent graduates, and allows buyers to specify age, grade point average, hobbies, sports interests, ethnicity, and other categories.1 Nowadays, ASL Marketing says it has mailing addresses of 4.3 million high school students and email addresses for three million.2 Jablon appreciated that he could target specific students in key New Jersey ZIP codes such as Princeton and Lawrenceville. “They are affluent neighborhoods, and if you have a college kid that lives there and he goes to school within a few hours away, that was ideal,” he says.

  Sophisticated segmenting allows direct marketers to rent very specific lists. Among the countless variations on offer are Americans of Iranian, Albanian, or Vietnamese descent or other ethnic origins; contributors to AIDS research; male virility supplement buyers; depression medication users; and cancer victims. Also available: gays who own boats; recently divorced African Americans; tobacco chewers; rich baseball fans; birth control users; readers who buy books about drug and alcohol abuse; women who have bought porn or sex toys; concealed weapon permit holders; online gamblers; and subscribers to The Dairy Goat Journal (just 4,025 households at the beginning of 2014).

  Las Vegas casinos have used direct mail for decades, typically targeting their own clients. When Caesars send out their 750 million pieces of direct marketing annually by mail and email, people get messages tailored to them.3 Some get two to three offers a month, others as many as twenty. That’s certainly a lot, but the company has found that the more offers it sends, the more responses it gets. Overall, offers to come on a specific date generate half of Caesars’ revenue, CEO Gary Loveman says. MGM Resorts, Caesars’ main rival in Las Vegas in terms of total properties, whose holdings include the MGM Grand, Bellagio, and ARIA, sends out forty million to forty-five million pieces of direct marketing a month.4 That’s at least two hundred million fewer offers per year than Caesars, but it’s still a lot. “We are all guilty of ‘Are you ready to buy, are you ready to buy?’” says Adam Bravo, MGM Resorts’ director of campaign operations.5

  Loveman believes customer data can also improve the client experience: “It drives me fucking crazy that in so many settings companies ought to know a lot more about me than they do.” He thinks firms such as cell phone providers, cable companies, and others that know a lot about what their customers buy should do more to cater to them—but they still fail to personalize the experience. Loveman scoffs at personal-data-rich firms that don’t provide individualized services. He gives the example of his own American Express Black Card. He paid $7,500 just to get the premium card and shells out another $2,500 annually to keep it. “God knows why,” he says. “As far as I can tell, there is absolutely no service that has been provided to me based upon what they have learned about me.”6

  Loveman would like to use the data he knows about his clients to target offers more intensively even within micro-neighborhoods. For example, someone in Philadelphia who lives closer to a rival casino may get a more generous offer than someone who lives closer to Harrah’s in the same city. “We want to treat every single person differently, based on what we know they care about and what we can afford to give them,” he says. This desire guided Caesars as executives crafted their evolving strategy toward collecting customer data.

  Origins of Database Mining

  Although Loveman has introduced many innovations in marketing during his time at Harrah’s and Caesars, he follows a long American tradition of appealing directly to customers at their homes. Companies started gathering home addresses en masse for mail-order sales in the nineteenth century. Mail-order companies such as Montgomery Ward and Sears, Roebuck and Company bypassed the expense of operating stores wherever their clients might be. Other firms took a similar approach in Europe. A century before Amazon.com, mail-order companies dazzled customers with their wide array of goods. They made exotic products available to even the most remote rural areas. Sears, Roebuck’s 770-page 1897 catalog offered nerve and brain pills for 60 cents, Dr. Rose’s Obesity Powders, a “sure cure for the tobacco habit,” “Peruvian wine of coca,” “57-cent princess tonic hair restorer,” and “bust cream or food unrivalled for enlargement of the bust.” Whether you wanted a banjo, a pack of diapers, a feather boa, or an array of farming tools, it was all in there.7

  Prices were quite high compared to what one could buy in Las Vegas in that era. A state land act made land available for $1.25 an acre, just a bit more than some Sears, Roebuck nerve pills and the tonic hair restorer. But people loved shopping through the mail. With such an exciting array of products, shipping goods directly to the home address became a big deal. By 1939, two years after Bill Harrah opened his first bingo parlor in Reno, Nevada, 434 mail-order businesses were operating in the United States—not including department stores, which also sold by mail.

  Directly targeting potential new customers through lists dates back nearly as long. Entrepreneurs mined telephone books to accumulate names as early as 1903—two years before Las Vegas was even established as a city. Back then, just owning a telephone line suggested wealth. A company called Multi-mailing, located across from City Hall in Manhattan, was selling lists of six hundred thousand names and addresses it had copied from phone books in New England, New York, New Jersey, Ohio, Pennsylvania, Maryland, Delaware, and Washington, DC.8

  * * *

  After learning computing basics at NASA, working briefly for IBM, and getting his MBA from Harvard, Hal Brierley launched a company to automate his fraternity’s national list of 150,000 members. It wa
s 1969. Out in Vegas, Caesars Palace was enjoying its heyday.

  Using exotic new things called computer printers, Brierley and others replaced conventional labels and tailored messages on an individual basis. Customization made it seem as though the person pitching you something really knew you. The computer stored information about when people had gone to school, where they graduated, and what they had contributed to the fraternity in the past. The technology helped boost fundraising tenfold within a few years. A letter might begin, “Dear Brother Brierley,” then mention the year he joined and his member number, thank him for his recent gift, and close with an appeal for a little more this year. “We discovered that using the computer as a fundraising tool for segmentation and personalization significantly raised more money,” Brierley says.

  Over time, his company, Epsilon Data Management, attracted hundreds of nonprofit clients. Eventually it moved into for-profit work and became a direct-marketing giant. In the decades since Brierley cofounded the company, the explosion of digital records has allowed direct marketers such as Epsilon to gather an unprecedented amount of data on almost every American. Today the Irving, Texas–based company, part of publicly traded Alliance Data, brings in more than a billion dollars a year in revenue.9

  Epsilon caters to catalog and retail companies that share information about their clients in a data cooperative so they, in turn, can receive information about prospective new clients. From this information Epsilon filters a person’s purchases into more than twenty categories, such as home electronics, pet supplies, food and beverage, apparel, cigars and tobacco, and religious merchandise.10 It has information on 250 million consumers and sends out more than 40 billion emails annually, which it says makes it “one of the world’s largest permission-based email marketers.”11 That’s a fancy way of saying that it is not spamming people but sending out messages to people who have agreed to receive the emails.