(First published on Dataconomy)
For over the last decade, some of the most successful companies on earth have made their riches by mining user data and selling it to advertisers. The big question is whether this will continue to be a sustainable business model with the ever-mounting scrutiny on data privacy and if not – what’s the alternative?
Many say the Cambridge Analytica scandal sparked a great data awakening by bringing to light the ways in which some companies were amassing and monetizing personal data about their users. As a result, Facebook was recently slapped with a record $5 billion fine and new privacy checks.
This isn’t a problem that is exclusive to the giants of Silicon Valley. In Europe, hefty fines have also recently been meted out to British Airways and Marriott for data breaches. As data protection complaints have doubled year-on-year, regulators will be getting tougher on companies to ensure their compliance with GDPR (General Data Protection Regulation).
Meanwhile, GDPR has driven a global movement as governments outside the EU, from Australia to Brazil, are set to introduce similar data protection regulations.
In addition, GDPR has helped to create greater awareness about data protection among the general public. The European Commission’s March 2019 Eurobarometer survey showed that about 67% of European citizens surveyed know what GDPR is.
The convergence of a compliance culture within organizations, stricter data privacy regulations globally, and consumers becoming more aware of their rights will continue to have a huge impact on businesses that profit from personal data, and even any business which collects it.
The situation demands urgency as the stakes have never been higher. According to a report by Gartner, by 2020, personal data will represent the largest area of privacy risk for 70% of organizations, up from 10% in 2018.
But better privacy for individuals doesn’t mean it’s bad for business. On the contrary, companies can use this opportunity to establish trust with customers while becoming more thoughtful and innovative about their approach to data monetization.
For many firms, data monetization has been inextricably linked with the personal data of their customers. However, they could be collecting, generating or archiving other types of non-personal data that could be valuable to certain end users. That is, the alternative data that may even be overlooked by the business generating it.
This data might be structured or unstructured, but new tools and technologies have made it easier to mine and process such data into insights. These insights could serve as timely intelligence to those in other sectors, like economists, analysts or investors looking to identify patterns and trends.
In fact, there are many use cases for such alternative data in the world of investing when every bit of timely information helps to gain an edge. This is where anonymized and aggregated data matters most and personally identifiable information has zero value. What economists and asset managers most want to know is how many soft drinks Coca Cola is selling across Europe this quarter, not whether John Doe bought a Coke.
The growing focus on privacy doesn’t mean data monetization has been taken off the table. Data will always be an important and valuable asset for any organization, but it needs to be harnessed with the full respect of individual rights to privacy.