|By Jason Mondanaro||
|July 20, 2014 01:00 PM EDT||
As a Product Manager with deep technology roots I always enjoy reading HighScalability.com. While many of the articles are technical case studies, there are frequently good business discussions as well. The other day, I read an article on data monetization, Data Doesn't Have to be Free. In this article, the author makes the point that Walled Garden business models, where users separately give up their data in return for a free service, is not sustainable. The only monetization strategy that a Walled Garden can effectively leverage is a proprietary advertising platform and we all know how that is going. Consequently, Mr. Hoff advocates the emergence of an open market in data. He suggests businesses that collect data can in turn develop business models based on the value of that data for whoever is willing to buy it, which creates a new value-added service. Of course, where I disagree with this article is the death of privacy. Privacy is far from dead. The masses are just warming up with the privacy fight and will soon light a fire under the collective behinds of legislative and regulatory bodies. Already we see signs of this prediction by the Internet of Things (IoT) leaders, as I mentioned in my previous article. Privacy is coming, and social media aside, the volume of data that will be generated and available in these IoT platforms will likely dwarf even the likes of Facebook.
But I do believe in the inevitability of the open market for data. My only contention is that the data owners and producers, basically you and I, will be active participants. We will participate because we will be compensated for our data. I don't mean the lame current state of affairs where you get a free service like Gmail or Instagram or even Facebook in exchange for your data, that could potentially have limitless added value to other parties and services. I've heard it said that data is the new oil. The land owner doesn't do anything for producing oil or gas, but they do get a percentage of the revenue from the producers. The same model essentially needs to be in place for data:
- As a coincidence of my living and acting, I am producing data
- If you use that data to make a value added product or service, I should be compensated
- If you don't compensate me, you can't use my data
- If my data isn't valuable to you then I shouldn't expect compensation
Of course the open market of data will become more complex and standardized where you have the data owners, producers, aggregators, refiners and consumers. Money will flow through that whole chain and get apportioned correctly to each party along the way. Don't underestimate the expense and complexity of adopting such a model. For most industries, regulation or joint consortia set up such bodies that are funded by members or transaction fees. Think about the cellular/mobile call detail record (TAP), data clearing houses, Depository Trust Clearing Corp for the big market makers in the equity markets, or even Visa or Master Card for clearing credit card payments between banks. Consider the length of time and pain involved to found those entities. Who in this "my garden only" technology and social media industry is willing to step up to the plate and play nicely with each other to build a bigger future for all? I don't see it happening with the platforms founded on social media in the 2000s. They are still in the mentality of empire building as acquisitions are moved behind the safety of their walls. I do have hope for this new generation of IoT platforms and companies though. They seem to get that data is valuable and there is money to be made by sharing and compensating all parties as part of building a bigger pie for all. We'll see how the next few years play out.