Data Monetisation Frontiers Valuing Data

The global market for data monetisation is forecasted to grow from US$1.26bn in 2017 to US$3.12bn by 2023. At a compound annual growth rate (CAGR) of 17.1% during the forecast period according to market and markets.

Data monetisation is a strategy adopted by organisations to create additional revenue streams from the discovery, capture, storage, analysis, dissemination and use of said data.

Gartner research defines “Data Monetisation” as the process of using data for quantifiable commercial benefit. Data may be sourced internally or externally to create maximum value. Download our document titled “Are you exploiting the Data Dividend?”

If it Moves, Measure and Value It!

Online platforms, are physical-asset-light but have grown fast and deeply disrupted many industries (Li, Nire and Yamana, 2017, 2018). Airbnb only has 1.7% of the employee size of Marriott International but has more listed properties than the top five global hotel groups combined (Hartmans, 2017).

Also, online platforms seem to deliver digital goods and services at Zero monetary cost. Economists have been attempting to measure the welfare effects related to “Free” digital goods and services. With, Brynjolfsson et al. (2018) estimating Wikipedia creates US$50 billion consumer surplus per year in the U.S.A alone.

Although, it has become common practice for consumers to exchange their data for "free" digital goods and services when interacting with social media platforms or online search engines. Will the consumer be willing to be as generous with their health, financial and education data?

Online platform companies are physical-asset-light and derive the majority of their profits from intangible assets.

Through the collection of copious amounts of data, incumbent within their online platforms.

This data may be monetised, and unlike R&D, which may depreciate due to obsolescence, the value of data may be enhanced, through its combination with other public or privately available data sources.

As AI becomes cheap, data is emerging as the core to govern the overall power and accuracy of an algorithm (Agrawal et al, 2018; Beck ad Libert, 2019; Lee, 2018). The acquisition of the two companies listed below may provide an insight into how data is being valued. ITA Software versus Farecast.

ITA Software

Has a large airline reservation network that collects detailed transaction data of U.S airline tickets.
When ITA Software was acquired, by Google the data – owner was valued at US$ 700m.

Farecast Software

Provides analytics and prediction services using data purchased from ITA software.
Farecast was acquired by Microsoft in 2006 for US$ 110m.

One may conclude that data may be more valuable than analytic capabilities. However, additional data points is required.

Online platform companies broadly speaking use two methods of monetising the data they collect from buy-side and sell-side actors.

One method is to license access to the data to clients, such as data analytic firms. Firms without inhouse data capabilities and or monetisation strategies tend to licence the use of their data.

The second way is to provide data targeting services to clients such as third-party sellers. This requires internal technical skills in related

to combining different data sources,
capabilities in data analytics and
subject matter experts

to deliver a data-driven business plan for a data targeting service that can deliver revenue.

Types of Online Platforms

There are seven major types of online platforms classified in a study by the OECD that are associated with data activities and data monetisation strategies.

E-Commerce Platform

Amazon Marketplace facilitates sales between consumers and third-party sellers. It offers consumers a place to purchase a wide range of products from more selections at cheaper prices.

It also allows third-party sellers to access one of the worlds largest e-commerce markets in a cost-effective and time-efficient way.

Amazon monetises its platform by charging sellers a 30% commission on their sales. This pays for the cost of accessing the online marketplace, but also for access to Amazon’s consumer data. 3rd party sellers can acquire consumer data.

However, the information available to the seller will differ from that viewed by Amazon.

Hence, the seller may view transaction data only, whilst data viewed by Amazon may include browsing history and clickstreams.

Also, owners of platforms will have a view of all transaction history across the platform.

Online Sharing Platform

Booking.com a leading online travel sharing platform facilitates sales between consumers and property owners. Property owners are Hoteliers, owner of private properties, rental cars and cruises.

On the buy-side, this two-sided marketplace enables a consumer to place reservations for rooms from many properties with discounted rates.

On the sell side, it allows hotels or property owners to access one of the world’s largest online travel markets and reduce the inventory of their highly perishable goods or monetise underutilised private rooms.

Fintech Platform

Ant Financial is China's largest online financial platform that facilitates transactions among financial institutions, merchants and consumers. It offers consumers and mico businesses (buy-side actors) a way to access credit.

For sell-side actors, financial institutions it enables them to reach a large pool of aggregated customers with no credit history. There are 870 million active users on the platform mainly from China.

LinkedIn

LinkedIn is a leading business and employment-oriented service platform that facilitates professional networking. For consumers it enables individuals to post their resumes and connect with professional friends. It also facilitates job search. For buy-side actors such as corporations and SME's it allows them to post jobs on the platform and search for potential candidates. There are approximately 500 million users in 200 countries. Revenue in 2015, was US$2.99bn.

Online Matchmaking Platform

eBay is a leading online auction platform that facilitates consumer2 consumer, business 2 business sales. It is free for buyers to use, but sellers are charged fees for listing items as well as the sale.

It provides buyers with a convenient and cheaper way to purchase products and special collection items. It allows sell-side actors to access a large online auction demand market. There are 175 million active users in over 30 countries.

Online Crowdsourcing Platform

Waze is a popular crowdsourcing platform that facilitates data sharing amongst drivers. Drivers report accidents, traffic jams, speed and other information about road conditions. It provides drivers with real-time traffic updates, routing, nearby cheapest fuel prices, and other location-specific alerts.

Online Search Platform

Google Search is the most popular online platform in the world. It provides consumers with a free, convenient and relevant way to source information instantly.

It allows advertisers and content providers to reach one of the world’s largest users bases in an effective fashion. It also enables content providers to add search functionality to their web pages and monetise their content.