Consumers are feeding a huge part of the data economy, but the value transfer from consumers to Big Tech is poorly understood.
Companies collecting and using consumer data – Google, Facebook, Amazon, Twitter among others - have astronomical market capitalizations. Consumers generate all that data with their actions. Yet consumers don’t even understand all the ways they are handing over data and have no concept of the value they generate.
Consumers generate data in myriad ways,
using web services such as search, e-mail, messaging and social media,
installing IoT devices that stream data into the cloud
using wearables that monitor their health data
making online purchases
using navigation systems that record where they are going
asking voice assistants to act on their wishes
It’s become almost become impossible to take any action without creating digital data exhaust. All that data ultimately ends up in the big data swamp, being bought, combined with other data, processed, used, and sold again, completely hidden from consumers. Consumers receive some of the value using the services. The service providers, however, are harvesting the lion’s share.
The 2-sided business model isolates consumers from the value creation
The 2-sided business model used by these service companies effectively splits data markets: the business-side market and the consumer-side market.
The business-side data market is fairly balanced, with multiple suppliers and a large number of users. Demand is driving supply, and the market appears to operate effectively. Companies making extensive use of consumer data have experienced dramatic increases in market capitalization, underscoring the value they derive from that data.
The consumer-side data market, in contrast, is completely unbalanced. There is no practical market role for consumers regarding their data. Consumers exchange data for services and receive no money in this exchange. Internet services have become life necessities. The monopolistic market position of service providers allows them to adopt a take-it-or-leave-it posture, as expressed in their terms of service.
The preceding series of blogs looked to answer the four key questions:
The attached paper contains the complete discussion, including all the references.