For over the last decade, some of the most successful companies on earth have made their riches by mining user data and selling it to advertisers. The big question is whether this will continue to be a sustainable business model with the ever-mounting scrutiny on data privacy and if not – what’s the alternative?
Many say the Cambridge Analytica scandal sparked a great data awakening by bringing to light the ways in which some companies were amassing and monetizing personal data about their users. As a result, Facebook was recently slapped with a record $5 billion fine and new privacy checks following a year-long probe by the US regulators into the Cambridge Analytica scandal and other data privacy breaches.
As The Verge pointed out though, Facebook had previously settled similar charges in 2011, but such slaps on the wrist don’t seem to be an effective deterrent. While a $5 billion fine sounds highly punitive, many in the industry doubt that this would solve the privacy problem overnight. (Especially when you consider that Facebook made $22 billion in profit alone last year.)
This isn’t a problem that is exclusive to the giants of Silicon Valley. In Europe, hefty fines have also recently been meted out to British Airways and Marriott for data breaches. As data protection complaints have doubled year-on-year, regulators will be getting tougher on companies to ensure their compliance with GDPR (General Data Protection Regulation).
Meanwhile, GDPR has driven a global movement as governments outside the EU, from Australia to Brazil, are set to introduce similar data protection regulations. The GDPR policy has helped to create greater awareness about data protection among the masses. The European Commission’s March 2019 Eurobarometer survey showed that about 67% of European citizens surveyed are aware of GDPR.
The convergence of a compliance culture within organizations, stricter data privacy regulations globally, and consumers becoming more aware of their rights will continue to have a huge impact on businesses that profit from personal data, and even any business which collects it.
The situation demands urgency as the stakes have never been higher. According to a report by Gartner, by 2020, personal data will represent the largest area of privacy risk for 70% of organizations, up from 10% in 2018.
Monetizing Data While Maximizing Privacy
Better privacy for individuals doesn’t mean it’s bad for business. On the contrary, companies can use this opportunity to establish trust with customers while becoming more thoughtful and innovative about their approach to data monetization.
Here are the three key factors organizations need to know about monetizing their data while respecting privacy and complying with regulations:
- Your business data could be valuable to those you might not have thought of..
For many firms, data monetization has been inextricably linked with the personal data of their customers. However, they could be collecting, generating or archiving other types of non-personal data that could be valuable to certain end users. That is, the alternative data that may even be overlooked by the business handling it.
In fact, there are many use cases for such alternative data in the world of investing when every bit of timely information helps to gain an edge. This is where anonymized and aggregated data matters most and personally identifiable information has zero value. What matters most to economists and asset managers is how many soft drinks Coca Cola is selling across Europe this quarter, not whether John Doe bought a Coke. The focus is never on the who but the what and how much.
- Technology has made it easier to extract the needle from the haystack…
Most companies have more data than they know what to do with. Forrester reported that on average, between 60% to 73% of all data within an enterprise goes unused. But new tools and technologies have made it easier to mine and process huge amounts of raw data into insights. These insights could serve as timely intelligence to those in other sectors, like economists, analysts or investors looking to identify patterns and trends.
Valuable or insightful data is simply good-quality data. And while data is always described as one of the most valuable enterprise assets, it’s not often treated like one. In order for firms to unlock the full power of data, they need to approach it as thoughtfully as any traditional asset. They will need to carefully consider issues like data architecture management and data quality management. If data is not their core business, then they need to find the right tech partners to ensure their data meets standards that enable the generation of insights.
- Aggregation and enrichment of data make it more valuable…
Your company’s raw data by itself can be one-dimensional. But integrating data from different companies and sectors can provide a more complete and nuanced picture.
For instance, a firm working with vendors across the country might have data on national beverage sales. It could track these sales and provide additional insights back to the vendors as a value-add to help them improve sales and promotions. The company could also share this data with beverage brands so they can finetune and optimize marketing by city. This would allow the company to monetize its data and open up a new revenue stream, without ever sharing any sensitive information that would jeopardize its relationship with customers.
When information is provided in an aggregated form, it’s a safe and secure way of delivering an exceptional level of insight without compromising privacy. It allows economic, social and commercial questions to be answered without revealing any individual’s details.
The growing focus on privacy doesn’t mean data monetization has been taken off the table. Data will always be an important and valuable asset for any organization, but it needs to be harnessed with the full respect of individual rights to privacy.