An often-repeated statistic reveals
that the human race created 5 exabytes (5 billion gigabytes) of
data between the dawn of time and 2003. It's now generating the
same amount every two days.
The numbers are open to question, but
the broad thrust is clear: we are creating a mind-mangling amount
of data. Data that can be mined for meaning and value
extracted.
Customer information has always had an
intrinsic and an extrinsic value. The intrinsic value lies in
understanding customers better, and being able to provide better
products and offers as a result.
The extrinsic value is sometimes in
selling databases of customer information - although this is
generally unpopular with customers and raises privacy issues - and
in increasing the accuracy and thus the value of advertising
opportunities.
As the web increased in popularity and
usage, brands and media companies used their web presences to
gather information and recruit subscribers. However, webnative
companies - companies built on and for the internet - arose and
began to outperform the old guard.
The Rise of the Data
Barons
The Bulgarian politician and consumer
representative Meglena Kuneva called personal data "the oil of the
internet." Some companies, either as an objective or consequence of
their business models, have established themselves as current or
potential "data barons".
Facebook is often the focus of bitter
disputes around data and privacy issues. This matters because of
Facebook's sheer size: it has reached 800 million members and
nothing seems likely to keep it from ten figures. Recently, 500
million people logged into Facebook in the course of a single
day.
The majority of Facebook's revenue now
comes from advertising - in 2010 an estimated $1,86 billion, with
estimates for the full year in 2011 up to $3,80 billion. The reason
Facebook is raking in so much ad revenue? Because buying the ads is
the only way to profit from Facebook's vast store of customer data;
you specify your target audience and they deliver the ads to
readers who fit the demographic profile.
Amazon has always had a clear reason
to gather customer information; the more information they have on
the kinds of products buyers of product x also buy, or look at, the
better the personal recommendations they can offer. As the company
has evolved from an internet bookstore to a hypertext hypermarket
and now to selling devices on which to consume media from its own
data centres, its needs have grown. Amazon now adds enough server
capacity every day to contain the global infrastructure created in
the first five years of its life. The amount of customer data it
generates has grown apace.
With the introduction of the Kindle
Fire opens an interesting new element to the way data flows through
Amazon's servers. To compensate for the slow processor of this
media-focused tablet, Amazon plans to use its own cloud computing
resources to cut up the meat of websites before serving them to the
tablet - compressing content to an appropriate quality level.
In practical terms, the page request
will be made by Amazon's cloud and then routed to the device from
there, meaning that even if the data is aggregated and stored
anonymously it could theoretically be used to improve associations
and even to deliver targeted advertising - for Amazon products or
third parties - on the page that arrives on the user's screen. US
Congressman Edward Markey has written to Amazon asking for
clarification of what information the Fire's browser will collect
and how it will be used. As is often the case, there is a balance
between delivering an improved service and maintaining privacy and
confidentiality.
When it comes to owning the screen,
it's impossible to miss Apple. In June 2011, the iTunes store had
225 million accounts with credit cards attached. In common with
Amazon and Facebook, a key element of these accounts is that they
are providing personally identifiable information, tied not just to
music purchases but phone apps, movies and increasingly media
through the App Store.
With the Newsstand service in iOS 5,
Apple has raised its game, aggregating magazines into one place
rather than hosting multiple apps, increasing the convenience for
browsers - and, the argument goes, the sales for content providers.
But there is a price to pay - not just a 30% cut, but the loss of
customer data, which without an option click is kept in their Apple
account. A cynic might point out that this makes the publisher a
content provider, with Apple owning the relationship.
What Happens
Next?
Unusual situations lead to strange
bedfellows. Google, which until it took steps to hamper searches
for file sharing at the start of this year was regularly attacked
for facilitating the death of the traditional media, has emerged as
a possible ally for publishers.
In France, several news publishers
have united to sell their iPad and iPhone content through
epresse.fr, an app outside Apple's Newsstand. Obviously it will be
left out of what will presumably be the first port of call for
magazines on iOS 5 devices, and from the benefits of tight
integration with the OS . Instead they plan to expand the platform
to other devices and to the web.
The web could, ultimately, play a
larger role. "Web apps" - mobile apps that route out to mobile
websites instead of working natively on the phone or tablet - are
often derided for their lack of offline function and
one-size-fits-all structure. However, HTML5 - still in development,
but supported piecemeal on mobile devices - adds several elements
to make the experience more "app-like", including, vitally, offline
storage. The Financial Times, with the advantage of a well-known
brand, is a notable early adopter, directing readers to app.ft.com
rather than the Apple App Store and thus avoiding the App Store's
regulations.
Loyalty
Programmes
Apps, native or otherwise, are not the
only option for companies looking for enhanced consumer
understanding, of course.
Traditional consortium loyalty schemes
such as Nectar have been doing many of the same things as Facebook
and the like. Based in Britain, Nectar cards can be used to earn
and redeem loyalty points for purchases across a number of high
street and online retailers, providing material for profiled data
analysis.
The sample numbers may not be as great
on a global scale, but for brands looking for analysis in specific
target regions this may be a benefit. Loyalty programmes offer a
clear benefit to consumers in exchange for information - just as
Facebook effectively rewards users for their data by providing a
social network.
Ultimately, brands and media producers
in the physical world need to deduce what will persuade customers
to share their data, match the methods of the technology platforms
and make smart alliances to approach their scale.
The chances of replacing or forcing
open tech platforms do not look great, ultimately. Once
established, a dominant player like Facebook (in social networks)
or Apple (in mobile media) can usually only be swayed by concerted,
unified industry action or by legislation - which will usually seek
to limit rather than facilitate the sharing of customer data. There
are, however, some advantages to this situation.
The technology and media sectors are
full of "frenemies" - companies that are simultaneously rivals and
partners. The frenemy model might apply to these data aggregators
as well. Their position at the head of the river may mean that they
collect huge amounts of data, but it also mean that they have the
resources to store, manage and analyse it to the point where its
use for targeting on behalf of advertisers becomes a salable
asset.
The walled gardens, in this light, are
more like the gardens of stately homes than feudal castles. You
have to pay to get access, and you cannot take anything away, but,
nonetheless, you are glad that someone else is pruning the
hedges.
THE VIEWS AND OPINIONS
EXPRESSED IN THIS DOCUMENT ARE THOSE OF THE AUTHOR.