Data for Sale?
I read an interesting article by Stephen Swoyer today on the TWDI site today, about a new Gartner report that suggests that companies should start selling the data they collect for BI purposes to third parties via public data marketplaces. This is a subject I’ve seen discussed a few times over the last year or so – indeed, I remember at the PASS Summit last year I overheard a member of the Windows Azure Marketplace dev team make a similar suggestion – and I couldn’t resist the opportunity to weigh in with my own thoughts on the matter.
The main problem that I had with the article is that it didn’t explore any of the reasons why companies would not want to sell the data they’re collecting in a public data marketplace. Obviously there are a lot of hurdles to overcome before you could sell any data: you’d need to make sure you weren’t selling your data to your competitors, for example; you’d need to make sure you weren’t breaking any data privacy laws with regard to your customers; and of course it would have to be financially worth your while to spend time building and maintaining the systems to extract the data and upload it to the marketplace – you’d need to be sure someone would actually want to buy the data you’re collecting at a reasonable price. Doing all of this would take a lot of time and effort. The main hurdle though, I think, would be disinterest: why would a company whose primary business is something else start up a side-line selling its internal data? It has better things to be spending its time doing, like focusing on its core business. If you sell cars or operate toll roads why are you going to branch out into selling data, especially when the revenue you’ll get from doing this is going to be relatively trivial in comparison?
What’s more, I think it’s a typical piece of tech utopianism to think that data will sell itself if you just dump it on a public data marketplace. Maybe apps on the Apple App Store can be sold in this way, but just about everything else in the world, whether it’s sold on the internet or face-to-face, needs to be actively marketed and this is something that the data generators themselves are not going to want to make the effort to do. As I said earlier, those companies that are interested in selling their data will still need to be careful about who they sell to, and the number of potential buyers for their particular data is in any case going to be limited. Someone needs to think about what the data can be used for, target potential customers and then show these potential customers how the data can be used to improve their bottom line.
For example, imagine if all the hotels around the Washington State Convention Centre were to aggregate and sell information on their bookings for the next six months into the future to all the nearby retailers and restaurants, so it was possible for them to predict when the centre of Seattle would be full of wealthy IT geeks in town for a Microsoft conference and therefore plan staffing and purchasing decisions appropriately. In these cases a middle man would be required to seek out the potential buyer and broker the deal. The guy that owns the restaurant by the convention centre isn’t going to know about this data unless someone tells him it’s available and convinces him it will be useful. And just handing over the data it isn’t really good enough either – it needs to be used effectively to prove its value, and the only companies who’ll be able to use this data effectively will be the ones who’ll be able to integrate it with their existing BI systems, even if that BI system is the Excel spreadsheet that the small restaurant uses to plan its purchases over the next few weeks. Which of course may well require outside consultancy… and when you’ve got to this point, you’re basically doing all of the same things that most existing companies in the market research/corporate data provider space do today, albeit on a much smaller scale.
I don’t want to seem too negative about the idea of companies selling their data, though. I know, as a BI consultant, that there is an immense amount of interesting data now being collected that has real value to companies other than the ones that have collected it. Rather than companies selling their own data, however, what I think we will see instead is an expansion in the number of intermediary companies who sell data (most of which will be very small), and much greater diversity in the types of data that they sell. Maybe this is an interesting opportunity for BI consultancies to diversify into – after all, we’re the ones who know which companies have good quality data, and who are already building the BI systems to move it around. Do public data marketplaces still have a role to play? I think they do, but they will end up being a single storefront for these small, new data providers to sell data in the same way that eBay and Amazon Marketplace act as a single storefront for much smaller companies to sell second-hand books and Dr Who memorabilia. It’s going to be a few years before this ecosystem of boutique data providers establishes itself though, and I suspect that the current crop of public data marketplaces will have died off before this happens.