The information bazaar: How eCommerce companies can turn data into profit

By: Ajay Kelkar, COO, Hansa Cequity

In 1872, Aaron Montgomery Ward set off a consumer revolution by launching the first-ever mail order catalogue. This was quickly dubbed as the ‘wish book’ by rural American households with previously limited access to many products.

The catalogue business marked the origins of how businesses could turn information into money. Today, the Internet and giants like Flipkart, Snapdeal, etc, are doing the same thing for many Indian consumers. They are collecting massive information about shopping habits of millions of buyers and deriving value from this information. Kroger generates an impressive $100 mn annually in incremental revenue by sharing information about its customers with FMCG brands. As Flipkart looks to build a profitable model, this may be the path it may also take. eBay has already started selling information products, but sharing its consumer buying behavior databases may be a unique new revenue line for companies like Flipkart.

Today’s businesses have the opportunity to work with all sorts of data: Contact details, location information, purchasing history, social and professional contacts, browsing history and online behavior, store visits, tel-evision preferences, and their personal views—much of which is gathered in real time. Big data is fundamentally allowing businesses to ‘mash up’ both structured and unstructured data, from a host of sources, sites, and sensors.

DATA: AN ASSET

Data is an asset but its value is often hidden away in every company. Digital technologies now enable massive data collection, as the cost of data storage has fallen. Facebook has grown to a $200 bn company in less than a decade. Capturing user data helps these companies provide customized ads to users that help them monetize these ads better.

‘Infonomics’ is now being heard about far more often. It describes the discipline of quantifying, managing, and leveraging information as a formal business asset. It surmises information is an asset and should be managed as an asset because it has a value.

Gartner predicts that the financial demands of storing and managing big data will lead 30% of businesses to directly or indirectly monetize their information assets by trading, bartering or outright selling them by 2016. Some industries like telecom services have technologies that allow them to pinpoint the real-world geographic location of millions of active mobile users—whether through GPS, Wi-Fi hot-spot usage or network caller-data records (CDRs). 90% of mobile users keep their mobiles within 1 meter of them 24x7. A telco may decide to share with local retail businesses general demographic information such as age groups in a certain neighborhood. This in turn allows local retailers to tailor their micro-marketing approach and potentially create new revenue streams based on that third-party data.

Consumers and business line owners are beginning to recognize that the insights locked in data that reflect personal usage, location, profile, and activity have a tangible market value. Almost 8% of global daily tweets carry a location reference. That is valuable data for any number of retail businesses.

Often companies have transaction data that can be of great value to other industries: Look at this example from Netflix: “We find ourselves in the unique position,” says Ken Florance, Director of Content Delivery at Netflix, “of having insight into the performance of hundreds of millions of long duration, high-definition video streams delivered over the Internet.”

Netflix ranking of ISP speed isn’t simply for short bursts of data transfer, it’s for sustained transfer over time. Florance explains that Netflix data actually smoothes out a number of issues in comparing ISP speeds: “As we use a number of CDNs and our clients can adapt to changing network conditions by selecting the network path that’s currently giving them the best throughput, Netflix streaming performance ends up being an interesting way to measure sustained throughput available from a given ISP over time, and therefore the quality of Netflix streaming that ISP is providing to our subscribers. Obviously, this can vary by network technology (eg, DSL, cable), region, etc, but it’s a great high-level view of Netflix performance across a large number of individual streaming sessions.” The question now is how can companies participate in this information economy?

REWARD CONSUMERS FOR SHARING DATA

One simple example is Google’s Screenwise Trends panel, which gives a $5 cash voucher to anyone willing to simply share his Internet browsing behavior with Google and its partners, with a further $5 gift every three months thereafter. Or take Raptr, an app that tracks users’ video gaming habits in exchange for regular rewards, such as in-game content or free games. But these are just the starting point. Other businesses will start to develop more creative incentives, from loyalty points through to enhanced services to encourage consumers to share their data.

FIND NEW AVENUES FOR DATA COLLABORATION

Encouraging greater sharing from consumers is one side of the puzzle, but companies also need to rethink which other partners they might work with, to realize mutual gains through data sharing. As the Netflix example shows, you can be creative in looking for data across the spectrum.

Data is an asset but its value is often hidden away in every company. Digital technologies now enable massive data collection, as the cost of data storage has fallen. Capturing user data helps these companies provide customized ads to users that help them monetize those ads better.