After three years, the experiment known as Experian DataLabs in San Diego is bearing fruit.
Launched in 2011 as a consulting firm aimed at helping Fortune 500 corporations solve major marketing and risk manage-
ment problems through data analy-tics, the unit has generated sufficient business to convince its parent company to invest in two more data labs, said Eric Haller, who oversees the operation in Carmel Valley.
“We’re now building DataLabs in London and Sao Paulo,” said Haller. “It took us three years to prove our business model. Even though we’re not a [profit-and-loss-statement] type of company, the board wanted to see if we could bring in more projects, which we did.”
Indeed, as the lab grew its projects in both number and complexity, Experian PLC’s board tripled its investment in the venture, Haller said, declining to reveal dollar amounts.
Based in Dublin, Ireland, Experian PLC is the largest of three largest credit scoring providers, the others being Equifax and TransUnion. It reported annual revenue for the fiscal year ended March 31 of $4.8 billion, and employs 16,000 people in 39 countries.
High-Risk, High-Return
In San Diego, the DataLabs unit grew from five employees at its launch to 30 today. Haller said Experian opened its office here because of the talent pool in the analytics space and because he lives in Encinitas.
All of the scientists working at the lab are “heavy quants” and include three who have doctoral degrees in computational neuroscience, or machine learning, Haller said.
The work conducted at the lab involves using massive amounts of data to develop new approaches to corporate problems.
“We’re typically working on high-risk, high-return type of problems,” Haller said. “The true purpose of the lab is to innovate new products and new services with a potential of a high return.”
Haller described one recent successful project the lab achieved for a mega bank — he declined to reveal any clients but said the bank was one of the five largest in the nation — that wanted to find more effective ways of convincing their debit card users to use their credit cards.
To develop the solutions the lab analyzed about 7 billion customer transactions over a three-year period from the client bank, and incorporated Experian’s own data.
The lab’s solution entailed finding 550 unique segments of users that the bank could target. That was far too many so the lab culled the segments down to 20, Haller said.
The bank was so pleased with the outcome it has engaged the lab in an ongoing contract. The developed solution is also being used by five other major banks, Haller said.
Tackling Problems on Spec
In many cases, the lab reaches out to potential clients proposing a project, without knowing whether it can find an answer, Haller said.
“We may go after something, but there may not be a solution,” he said. “We may fail in nine out of 10 efforts, but if one of them hits, it can be really big for the company.”
At any one time, Experian DataLabs may be juggling 12 to 20 projects for clients, while each of the lab’s scientists is working on three to four projects, Haller said.
The unit competes with some of the largest companies in the world on high-level computer engineering talent including Google Inc. (Nasdaq: GOOG), Microsoft Corp. (Nasdaq: MSFT) and Yahoo Inc. (Nasdaq: YHOO), Haller said. “Eighty percent have Ph.Ds.,” he said. He declined to give a range for salaries of the scientists except it was above six figures.
While clients in the financial services industry account for a large group of DataLabs projects, it’s also working for clients in the mobile wireless, social media and health care industries, Haller said.
Craig Focardi, senior research director at CEB TowerGroup, a Novato-based research and advisory firm, is aware of DataLabs and of a continuing trend of larger corporations, particularly financial institutions, using analytics companies to help them become more efficient and profitable.
Many of these banks are dealing with a contracting lending environment and seeking ways to expand, particularly in mortgage lending. They’re also looking for outside experts to help them make better lending decisions and reduce default risk, he said.
Experian has been a leader in leveraging its credit bureau data in a number of ways for financial entities in helping them make loan decisions, with customer retention, and in customer cross-selling activities, Focardi said.
EXPERIAN DATALABS
Top local executive: Eric Haller, executive vice president
No. of local employees: 30
Investors: Parent company Experian PLC
Headquarters: Carmel Valley
Year founded: 2011
Company description: Helps Fortune 500 corporations solve major marketing and risk management problems through data analytics
Key factors for success: Ability to identify high-risk, high-return problems to solve for large companies
