In today’s world of Big Data, SaaS, virtual products and services, data is king. Companies from the earliest stage tech start-up to the most established brick and mortar want to find ways to monetize their data. For many small and medium sized businesses monetizing data could be the key to significantly growing their business organically and without a large investment. However, few companies ever achieve this goal.
What makes it so hard for companies to monetize their data? It’s challenging to define what monetizing data really means for a given company and if you can’t define the goal then you certainly can’t create a plan to achieve it.
Figuring out how to monetize your data first requires an understanding of what you hope to accomplish. There are three main ways to monetize data. Listed below are examples of companies that have successfully monetized their data using those three methods.
- Creating Additional Revenue Streams is the easiest way to think about monetizing data. However, creating new information, products, or services from your data may be the most difficult way to monetize your data. In order to do this successfully, the company needs data that changes over time and has a defined market that values the data enough to pay money for it. American Express, the premier credit card provider, has been very successful at leveraging their consumer and business buying habits and purchases data. They launched a separate business, American Express Business Insights “a global information, analytics, and consulting organization that combines real behavioral information — based on actual aggregated purchasing data — with sophisticated analytics to reveal unique insights about your customers, competitive set, and marketplace.” With their Business Insights venture, American Express has achieved significant success by leveraging their proprietary data and augmenting it with consulting services and sophisticated analytical tools; creating an entirely new business, independent from their core business of credit card services thus attracting clients that may have no prior relation with the core business.
- Differentiating Existing Products/Services is the way most companies that successfully monetize their data are able to do it. This is where the company packages information services at a premium to provide different levels of services. It can be as simple as bundling information into basic products to create premium products or to encourage customers to move a subscription model that includes information services from a transactional service that doesn’t. A company can get more sophisticated and differentiate its products by providing specialized services to target key markets, potentially at a premium, to wider range of customers. LinkedInhas been successful monetizing its data by differentiating its core free product from premium subscriptions. The subscriptions offer more access to information, intelligent searches and increased functionality focused on the needs of the target market they are addressing; Recruiters, Job Seekers, Sales, and Businesses. LinkedIn has further differentiated their service within each subscription type by packaging the access and special features into tiers with higher rates for the further enhanced specialized services.
- Promoting the Company is the least obvious way to monetize data, but can lead to significant rewards. A company can monetize their data through promotion when it identifies it has unique information that would be valued by a large community. This information may not be valued enough to generate significant revenue and/or may have greater impact if it is publicized rather than sold. ADP has become the “gold standard” for outsourced payroll due in part to how they leveraged their data. Since 2006, ADP has announced their employment and salary numbers, the National Employment Report or commonly called the “Jobs Report”. Wall Street waits and responds to these numbers with as much or maybe even more regard than the official Department of Labor employment numbers. ADP leveraged their dominant market position and became the outsource payroll company people think of first or at all. Companies that provide similar services to ADP are always measured against and competing with ADP, even when ADP is not actively involved in the sale, because ADP monetized their data to own the industry.
Companies usually do not have a good idea of what data they can leverage to be monetized. Usually the company believes they have “all this great data” and “there must be some way to make money from it.”
So what does it take for a company to be able to monetize their data?
First, a company needs to have the data. They need to be able to capture, organize and store data. Which means the companies whose operations support systems are people, spreadsheets, and “spit and wire” don’t know what data they have. The same goes for companies that invested in sophisticated systems but the employees avoid using because they don’t simplify the process. In order to “have the data” a company needs to have systems and infrastructure in place with rules and processes to label, categorize and manage the data. These systems also need to make it available to be extracted, aggregated and reported in a variety of ways.
Second, a company needs a few people who collectively understand the end-to-end business process, the product, the customer needs, complaints and the market in general, to share ideas and dig into the details about the data. Sometimes the idea comes first and you find the data, while other times understanding the data leads to the use. Often this requires “thinking out of the box” to figure out how to use the data as a new complimentary service or to promote the company.
Finding ways to monetize data doesn’t happen by accident. It’s a methodical process that requires dedicated effort and executive commitment; otherwise it becomes a second priority. In today’s world, we can’t get through all our top priorities, never mind drill to the next level down. It is a challenge, but when a company succeeds in monetizing its data, it’s a game changer