Valuations Are Being Fueled By Your Data

by Jay Deragon on 08/03/2011

Data drives everything we know and don’t yet know. Data also drives the economic value of the internet.

Every time we type an email, dial a number, add a tweet or publish content we are adding data to the “network” and that data carries meaning and meaningful indicators of behavior.

Data is exploding faster than most imagine and with explosive growth organizations, people and machines are learning more about human behavior and people’s preferences faster than ever before.

Moore’s law states that the amount of digital information increases tenfold every five years. The social web is accelerating data. According to Cisco by 2013 the amount of traffic flowing over the internet annually will reach 667 exabytes.

An article in The Economist observed, we are at the point of an “industrial revolution of data,” with vast amounts of digital information being created, stored and analyzed. The rise of “big data” has led in turn to an increased demand for tools to both analyze and visualize the information.

Doc Searls writes: We need our own tools for controlling the way our data and other personal information is used. Some of these tools will be technical. Others will be legal. That means we will have tools for engagement that say right up front how we want our data used and respected. We can do this without changing any laws at all – just the way we engage.

As I said in The Data Bubble, the tide began to turn with the Wall Street Journal article series titled “What They Know,” which is about how companies gather and use data about us. More and more of us are going to be creeped out by assumptions made by marketers about what we might want.

This is also part of what I believe is an advertising bubble. Our tolerance of too much advertising is like the proverbial frog, boiling slowly. The difference is that the frog dies, while we’re going to jump out. Everything has its limits, and we will discover how much advertising we’re willing to suffer, especially as more of it gets too personal.

The holy grail of advertising for many decades has been personalization. If we know enough about a person, the theory goes, we can make perfect bull’s-eye messages for them. But this goal has several problems.

Today’s Factories Produce Data

Abhishek Mehta, managing director for big data and analytics for Bank of America said: Is the role of data changing your business model? You’re getting more mobility with Web access; you’re learning more about your customers in real time. How does that affect the business model & product you offer?

I talk about the emerging business model in the context of what I call the “data factory”. I think we are witnessing the second industrial revolution. And it is fueled by data. And it will be bigger than the first industrial revolution, because finally technology has democratized not just the access of data to a plethora of new companies but also the ability to store, mine, clean, analyze, and produce data products that can solve problems that you could not have solved before.

So these data factories are going to emerge as the new drivers of innovation of a massive revolution that will change fundamentally how business models extract value, because data is going to be, is the core asset in a multitude of industries. And the ability to automate the data pipeline and then rapidly find information in it to make decisions that benefit our end-customers, will add value.

I think the emergence of the data factory will truly drive the second industrial revolution. Massively change the way we drive value.

Google and Facebook are data factories. They are also new properties. Outside of new properties are people like me, who are sitting on large legacy infrastructures, who need a massive incentive to change because no incentive to change is greater than the status quo. Status quo is always the enemy of change.

Who is Using Your Factory

The collection, analysis and use of consumer data is and will continue to both be valuable and yet threatening to privacy and individual preferences.  Think about the implications already being revealed.  How and what you communicate and associate with reflects your character, affinities and values. All of the related data is for the world to see and organizations to use both for you and against you.

Ever wonder how Linkedin, Facebook and Twitter can demand such high valuations? It is because they have your data and that of your friends. From that data they can predict behavior which means economic opportunities to influence your behavior.  Get it?

{ 1 comment }

R R Dasgupta August 24, 2011 at 11:53 am

Very good points here, Jay (as usual). What this means to me is the need to refine my personal ability to predict and influence the behavior of my audience i.e. what they want, how can I collaborate with whom, how can I make myself more “relevant” and “valuable” . The power of one in the deluge of data is huge only if we can master the fine art of articulating the right “signals” as against adding to the “noise”

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