ABJ: Understand the value and potential costs of your data

Author: Tyron Stading, Austin Business Journal Guest Columnist

We’re constantly bombarded with content. From checking Facebook and Twitter on our smartphones to gathering engine diagnostics from our cars on the morning commute, we are taking in and putting out more content than ever before. And as the lines between personal and professional activity continue to blur, companies are paying top dollar to gain access to this data to better understand customer buying habits, and the more strategic companies are using this data to generate revenue.

For example, have you noticed that if you conduct a Google search for “lcd tv,” it seems no matter the website you visit for the next few weeks, ads for televisions line the sidebar. Facebook is another example of a company that monetizes its users’ information to help target advertising. While these are just marketing examples, more data provides us the ability to make better decisions and more money.

Because of this marketing evolution and explosion of big data in general, data and its content is extremely valuable. A good example of this is the current competition in video on demand between Netflix, Amazon, Verizon, Apple, Aereo and other streaming content providers. The business of Internet television and movie streaming will be big money, and the content holders are leaving their rights to shape the market. However, this is forcing creative strategies for companies to create their own content. For example:

  • Netflix is creating its own popular TV shows such as “House of Cards” while resurrecting “Arrested Development.”
  • Verizon is working with Redbox to provide a competing streaming video product.
  • Aereo is using micro antennas and cloud DVRs to bring basic television to the Internet.

All this has implications for you, from both a consumer and business perspective.

Free is a relative term

Understand the costs of “free” because your data is now a valuable currency.

There has been a backlash in Europe over privacy issues, specifically around Facebook. The challenge is that data has become so valuable that people are offering free services — no charge to the users or third parties — to get it. But the user is often unaware of the ownership implications and does not consider the potential legal impact. For example, Facebook has rights to analyze your data for any purpose — see Facebook’s legal terms — and Google now receives search warrants or court orders for the release of your data. (See the Google semi-annual Transparency Report for more). The Internet is no longer anonymous or hidden, so just be clear on how your data is used. Here are things you need to consider and be aware of:

  • Who can see my data?
  • Who owns the data?
  • Will my data be sold, and will I get advertising targets as a result?
  • What types of data are stored? Can this get me in trouble?

What appears to be free data can quickly turn into a very costly experience. However, data is the new currency, so leverage it if you can for free products/access.

Money in the couch

Look for opportunities to monetize your own business data. There are channels to make money from data you have gathered, and it doesn’t have to be user data. With the right strategy, companies can make as much as 10 to 20 percent of their gross revenue from data. However, many companies are unable to capitalize on their data because they don’t consider how they can monetize it, how to ensure privacy rights, or how to package and publish the data.

Don’t be limited by having to deliver the data to the customer, as there are plenty of people looking for content to deliver to customers. For example, companies like DemandMedia are able to monetize their content for advertising. Anti-virus companies sometimes give away detection software so they can sell benchmarking and alert data back to companies; here, the value is in the aggregation of the data. According to a recent TechCrunch article, Google valued their GEO data at $1.7 trillion — they do this as a freebie to get users. Leveraging ancillary data as a free product or promotion for your core data can be very attractive.

At my company, Innography, while we have a strict privacy policy and cannot access users’ data, we have discovered alternate channels to help our customers by using the proprietary data in human resources, marketing and finance. For example, banks will make loans to businesses and use patents as collateral. Harvesting this data is useful not only for securitization, but risk assessment for credit worthiness. Similarly, virtual résumés — think LinkedIn — can be generated for patent inventors, providing invaluable data for HR, recruiting and other users. With the right perspective, your company could be sitting on some very valuable data.

If you build it

Find opportunities to build the data. Whether business-to-business or business-to-consumer, content can give real competitive advantage if it is compelling and unique. Waze is a mapping company that used crowdsourcing to build GPS data for streets and businesses, with recent rumors of acquisition by multiple large companies. This novel and cost-effective approach is extremely hard to beat compared to more expensive methods, such as the use of fleets of cars mapping images using GPS, and one of the reasons Apple licensed its data.

Another example is Instagram acquiring your photo data, which in turn prompted Facebook to acquire it. This private, unique data creates a stickiness and affinity for a service that is hard to replace. The bottom line is to think about the value of your data, then either use it yourself or find ways that it may be useful in the future for others.

There are many companies in Austin alone that are taking this approach, so if you aren’t thinking of data as an asset, I can confidently say that your competitors probably are.

Tyron Stading is president of Innography, an Austin-based company that provides Web-based applications for managing intellectual property.

View the full article from the ABJ