We present a simple, jargon-free explanation of what Data Monetization is and what it means for your organisation.
In the last few years, business terms like “Data Economy” and “Data Monetization” have been thrown around during executive meetings. While these terms might seem easy to comprehend at first, there are several key concepts associated with them that are often misunderstood. In order to communicate effectively with other executives, a good understanding of these concepts is needed. Here, we present a jargon-free explanation of what these terms entail and what it means for your organisation.
The Data Economy refers to an emerging economy where data is the main resource that organisations produce, distribute, trade or consume. In this economy, the success or failure of organisations depends on their ability to use data to generate revenue, improve work processes and make strategic decisions.
Data Monetization is the use of data to create value for an organisation. Raw information may be packaged into data products and sold or processed to extract insights that can be used to support business decisions. Data is treated as a real asset and has an economic value attributed to it. Gartner, a research and advisory firm in the US, calls this “infonomics”.
The process of Data Monetization involves looking at data for segments that have the potential to be monetized. Data can be monetized in two ways – directly or indirectly. Direct Monetization refers to data assets that can be sold or traded with other organisations. These can be in the form of information assets packaged into data products or real-time data streams. Indirect Monetization refers to data assets that can be used to optimize business processes. For example, data analytics can be performed to gain insights that would increase customer lifetime value, increase repeat purchases or lower production costs. Data can also be used to minimize revenue leaks through proper market segmentation and effective marketing.
Data Monetization requires constant internal and external evaluations on the state of the market. Throughout this process, data that is being monetized is constantly collected and analysed to draw insights into trends, opportunities and threats. As a result, organisations that employ data monetization strategies are well ahead of the curve in terms of innovative capability. With data at the heart of business decisions, they no longer have to fight to keep up to date with the market. Staying ahead of market trends using data becomes part of their day-to-day operations.
Brands like Google, Facebook and Uber have leveraged on data monetization strategies to grow into billion dollar companies. These companies think about data differently than the vast majority of businesses in today’s economy. While businesses have started to be aware of what data can do for them, most still do not have an effective data monetization strategy in place. Many are missing out on the opportunity to generate value for their organisation using the data that they collect.
An effective data monetization strategy helps businesses maintain a competitive edge by creating new revenue streams, reinventing work processes and reducing costs. As the Data Economy establishes itself in the near future, data monetization must be at the heart of every business decision for organisations to survive.
If you would like to learn more on how revenue can be made with data, we recommed that you read this post on Bolt-On Revenue.