During the ongoing COVID-19 pandemic, numerous companies have focused on cutting costs and creating additional income sources. This has often resulted in putting promising innovation projects on hold, liquidizing assets, and even letting staff go. But what if there is a way to drive additional income without making such drastic changes or significant investments?
What is data monetization?
Nowadays, information is one of the most valuable resources at the disposal of a plethora of companies. Data monetization is the process that allows identifying valuable data within companies’ business operations and turning it into new revenue streams. According to Gartner, integrating data and analytics into key business roles is among the top trends for 2021.
The increasing need to get valuable insights from raw data opens multiple opportunities for data monetization vendors. According to MarketsandMarkets research, the global data monetization market was valued at $2.3 billion in 2020. It is growing rapidly and is set to reach $6.1 billion by 2025.
Direct and indirect data monetization approaches
Connected devices and other digital technologies, together with data monetization, allow businesses to gather a massive amount of data that offers insights into consumer demographics, preferred products, sales performance, etc. There are two main data monetization strategies: direct and indirect.
Indirect data monetization involves leveraging these information insights within your business processes to predict demand, minimize waste, segment customers and optimize price and supply chain, etc.
Direct data monetization — implies exchanging data-derived insights for money or cryptocurrencies, directly turning them into income-generating assets. Direct data monetization is often part of long-term roadmaps, yet it always seems neglected, coming after blockchain adoption, AI, and hyperautomation in terms of priority.
According to the BI Survey, even though the market is expanding significantly, only 25% of large organizations and 9% of small companies have actually launched data monetization initiatives. Companies are sitting on millions of dollars of potential revenue benefits from data monetization, and only a handful of them are actually making it a reality. Most of the time, the reasons why companies postpone monetization of their data are trivial, like the fact that they have never done it before.
Use cases for data monetization
Many types of data can be sold – from raw sensor data to insights obtained by analytics teams. Data that can be turned into a product differs greatly for each industry. For example, in insurance, customers’ claims histories are widely used for identifying fraud. In media and entertainment, anonymized customer data can be used to find behavioral patterns and target the right audience. Here’s a brief showcase with real-life examples of how companies monetize data products:
- DTN. The agriculture company focuses on subscription-based services for the analysis and delivery of real-time data. It has created a cloud-based data tool for sharing information like field-level weather and commodity prices with agricultural businesses.
- Vodafone. The mobile communications provider uses anonymized and aggregated mobile data to obtain insights about users’ mobility patterns. The tourism sector can then leverage the gathered information to understand both national and international tourists’ behavior or by the real estate industry for site planning.
- Uber. With the user’s permission, the ridesharing service can sell location data to food and retail industry players. Other companies can leverage this data to provide discounts and promotions personalized to the specific customer.
Preparing for data monetization
Before starting on the path to data monetization, pay attention to the following data monetization strategy components:
- Licensing and unauthorized usage. You can ensure that your data cannot be resold legally by creating a proper license. However, it is quite a challenging task to identify those consumers that have breached the licensing term. Some data vendors find it one of the most difficult problems to address. Fortunately, there are multiple techniques for detecting unauthorized usage. Should you need any additional information on this topic, please let us know in the comments below, and we’ll be happy to answer your questions.
- Data privacy. Each data vendor must comply with new data protection laws, like GDPR, that enforce the protection of personally identifiable information.
- Competitive advantage. Selling the data that gives you an edge over your competitors is not a wise decision. Determining what data can and cannot be monetized is challenging but vital.
- Marketing. Without a doubt, creating a marketing strategy for data monetization is pivotal. It includes consumer and market analysis, a review of your competition, and, of course, a marketing mix (product, place, promotion, and price), among other things. Please keep in mind that there are also ways to avoid explicit pricing of assets.
- Data quality. This is a vital component of any monetization strategy. It makes consumers trust their vendor, which can be the difference between having dozens of clients and having thousands of clients. And as with documentation, focusing on data quality results not only in a better customer experience but also in internal gains.
- Using data marketplace vs your API. There are different pros and cons of using both methods. For example, publishing your data to a marketplace makes it easy for marketplace users to discover and requires fewer infrastructure resources, while distributing it on your own grants you much more flexibility in terms of pricing options, etc. Marketplaces include specialized companies like Ocean Protocol and Datapace, as well as software vendors like Snowflake. Informatica has also jumped on the bandwagon of data monetization.
- Scalability and availability. Ensure that your data is accessible to consumers all the time and that it is distributed to all of them without any degradation in speed to provide a better user experience.
- Documentation. The importance of thorough documentation must not be underestimated. Not only does it greatly benefit the consumer, but it also adds to the internal understanding of the data.
Many companies have substantial amounts of unused data. And while these companies are sitting on a gold mine, very few of them decide to launch data monetization initiatives. Data that helps to develop and deliver new insights can identify new industry winners by boosting profits and creating internal value. Do not overlook your opportunity.
Let’s start your journey towards data monetization together. Get in touch today!
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