The Underestimated Cost of Monetizing Consumer Data

How to Monetize Data in Five Steps

One of the more exciting conversations concerning data now is the idea that organizations will be able to “monetize” data, using it as an actual product to increase revenues. Given all the focus and investments that organizations are making in data — from Big Data to cloud data to analytics — you can see why it’s such an enticing idea.

Alas, many companies are finding the effort much more challenging than they expected, according to John Lucker, Deloitte Consulting principal and global advanced analytics and modeling market leader.

I recently interviewed Lucker about Deloitte’s free report, “Analytics Trends 2015: A Below-the-Surface Look.” Monetizing data ranked as one of the top trends — but Deloitte puts a big question mark on it, suggesting that companies may find their “digital exhaust” produces little value:

“Data monetization initiatives clearly make sense in some sectors, and they are already fueling new products and service approaches. In other domains, results have been mixed. Companies often jump in without realizing that being a content provider can be risky business. Many lose money, or at least take a very long time to become profitable.”

Lucker has seen that happen while consulting on data monetization projects. 

“The first issue is, it’s not quite clear if it’s not profitable yet,” he said. “What is clear is there’s a lot of complexities that companies haven’t necessarily fully thought through.”

When it comes to consumer data, companies must wrestle with questions such as:

• To which data do we have appropriate ownership and the release rights?
• Are there privacy issues related to the data?
• Are there ethical concerns or questions that might trigger problems if we use this data?
• Is the data appropriate on a granular level or does it need to be summarized to shield people’s privacies?
• What about intellectual property preservation and protection? Is there embedded data that would be better kept proprietary?
• Will profit from selling the data be wiped out by the first lawsuit or bad press coverage?

These questions cover just the first issue with consumer data: whether the organization will profit from the monetization effort.

The second issue focuses on the value equation to the customer, Lucker explained. When customers provide data to a company — either indirectly or directly —they have some implicit ideas about how that data will be used. Monetization may be seen as a “violation” of that agreement, so companies need to consider what they may or may not owe customers in return.

For instance, there is a value exchange in customer loyalty cards. Customers receive discounts in exchange for their purchases being recorded. But what happens when they find out that a grocer is selling that information to a company to evaluate whether or not that person has a healthy lifestyle? For many customers, that may shift the value equation to a negative.

“What will the consumer’s sense be about further providing that information to the company once they find out their information is being monetized in some way? They might ask what’s the value back to me and are they entitled to have some sort of reciprocal value,” he explained. “So there’s this whole concept of the value equation in data monetization.”

Next week: Lucker explains some of the challenges with monetizing B2B data.

Loraine Lawson is a veteran technology reporter and blogger. She currently writes the Integration blog for IT Business Edge, which covers all aspects of integration technology, including data governance and best practices. She has also covered IT/Business Alignment and IT Security for IT Business Edge. Before becoming a freelance writer, Lawson worked at TechRepublic as a site editor and writer, covering mobile, IT management, IT security and other technology trends. Previously, she was a webmaster at the Kentucky Transportation Cabinet and a newspaper journalist. Follow Lawson at Google+ and on Twitter.