Businesses of all sizes are now generating significant amounts of data, with strong monetization potential. Determining the potential value of the data collected by your business, however, can be complex.
Data-driven businesses commonly determine the value of the data they collect by assessing the potential use cases of the data itself. Applying traditional accounting frameworks such as bottom-line improvement or top-line growth to the monetization of data, however, can be difficult — data is dynamic, as are the techniques used to monetize it.
How can your business determine the value of the data you collect?
Calculating the Potential Cost of Your Data
The value of data isn’t only determined by its potential monetization value. Poorly-handled data can result in significant losses — it’s possible to calculate the value of your data by determining how much it would cost your business to replace.
Data breaches resulting from poorly-handled or insecure data can severely impact the finances of any business. Data published in IBM’s 2019 Cost of a Data Breach study indicates that the average data breach costs businesses in the US almost $4 million. A single compromised data record can result in losses of $150.
How to Monetize Company Data: Direct Monetization
In order to determine the monetization value of your data, it’s necessary to define the methods through which data can be monetized: internal monetization, or external monetization.
Internal monetization involves the generation of value by leveraging data to improve customer success outcomes, efficiency, or automation. External monetization can include the generation of new income streams or the use of data to improve marketing strategies or sales funnels.
Direct monetization is an example of external monetization and is the most commonly used means of monetizing business data. Businesses that seek to directly monetize collected data sell their data to third parties, or provide access to their data as a service. Facebook’s data-driven monetization tools are a strong example of direct monetization.
Data Monetization Via Automation
It’s possible to indirectly monetize your business data by using it to automate tasks that would otherwise incur a time or human resources cost. A business with a dedicated mobile app, for example, is able to collect individualized customer data and use it to create automated customer support services.
Cloud-based accounting platforms or customized software solutions can collect data from a variety of disparate sources, minimizing data entry costs and providing deeper insight into the financial structure of your business.
Data Monetization Via Derivative Opportunities
There’s no limit to the potential of data monetization — combining business data with third-party data sources, for example, can deliver deep insight into business model efficiency, thereby multiplying profitability.
A supply chain organization, for example, may combine internal GPS data with external traffic data from platforms such as Waze or Google Maps in order to develop cost-effective transport strategies. The same derivative opportunity can be applied to agri-food organizations by combining external geographic weather and pest flora data to create cost-effective pesticide optimization strategies.
There is no single formula that can be used to define the value of the data your business collects. Data generated by a business, however, always hold the potential to deliver enhanced productivity, profitability, products, services, or business models, and should never be overlooked.