Remember the halcyon days of the
Dot-Com era? A frothy stock market,
venture capital money flowing like water and famous sock puppets characterized
the exuberance of the day. One company
(Boo.com) spent $188 million in just six months to create an online fashion
store. And 16 start-ups spent over $2
million each for a 30 second advertising slot during Superbowl XXXIV to crow of
their existence. But, all of the money
didn’t matter – the mantra was all about capturing “eyeballs.”
The business theory of the day was
that if you could get people to your website (the eyeballs) then somehow the
money would come gushing in. You were a
heretic if you questioned how that would happen. Eyeballs were a very monetizable item, so the
more of them the better. Of course, we
know what happened. The Dot-Com era came
to a crashing end when the market finally realized that these companies really
needed to have a viable business model, rather than waiting for the eyeball
prophecy to be fulfilled.
I can’t help wondering if the exuberance,
and some might say blind faith, in big Data is similar to some of the fallacies
of the Dot-Com era? Much of the Big Data
mantra is all about creating and collecting as much data as possible because it
has to be valuable. The more of it you
have, the more value you can create.
Don’t get me wrong. There is huge business and social value to be
derived from Big Data. There are numerous
examples in medicine, education, business and government where data analytics
has added huge value to the services and customer experience. There countless opportunities to use data
analytics to drive ever new sources of value.
The thing that I am challenging is the belief that by collecting huge
amounts of data that it can be directly monetized – or turned into money.
Mobile users, public Wi-Fi, smart city
deployments and user-centric applications are generating huge amounts of
data. Typically, huge streams of
personal data like location, preferences, application usage, and device type
are being generated by these uses. The
operators of these services believe that they are now sitting on a
goldmine. Their dream is to turn this
valuable personal data into mounds of cash by selling it to advertisers and
others who want to better reach and target end users. There seems to be great excitement and
expectations about how much this data is worth.
Many business cases now seem to use data monetization as a kind of
“Factor X” to justify otherwise questionable business cases.
Like the eyeballs of the Dot-Com era,
data monetization is all about advertising.
Advertising is a well-known business with well-established governing
business principles. At its simplest,
advertising is a function of the ability to target a customer times the number
of advertising impressions, or potential customers, that you can reach. For example, a golf club manufacturer is
willing to pay more to advertise to an avid golf player than the general
public. This is why big data is so
valuable. Personal information like
location, device and app usage can be used to provide a much better target
customer than general mass advertising.
We looked at the potential value of
this data in considerable detail for a prospective large smart city
deployment. We discovered that we could
definitely make money by selling the data generated on our smart city network,
but it wasn’t that different than traditional advertising models. Our proposed digital signage solutions
generated roughly the same revenue as traditional billboards on the sides of
bus shelters. Similarly, pushing ads to
mobile user devices generated marginally more advertising revenue than handing
out flyers to pedestrians. In total, we
calculated that we could generate roughly $1.5 million in new annual
advertising revenues. To put this in
perspective, that is just 5 percent of the total revenues that could be
generated from delivering the total smart city solution. The data can definitely be monetization, but
it is unlikely to generate the mounds of cash that is eagerly expected from
many operators.
As with Dot-Com eyeballs, once the
hype and the naïve assumptions are wiped away, there is no real magic to big
data monetization. While there is money
to be made from data monetization, it is highly unlikely to be a major revenue
generator. And, by no means should the
promise of monetizing data be used to prop up weak smart city and Internet of
Things business cases.
Big Data has been described as the
“New Oil.” That may be a very attractive
and compelling metaphor in a world where a barrel of oil sells for $100 or
more. But, remember oil can equally drop
to $40 to $50 a barrel as we are currently witnessing.
