Nonsense

The world’s most valuable resource is no longer oil, it’s data.

It’s a catchy phrase alright but it’s nowhere near true.

Facebook, for example, might sell some data – anonymised and all that – but it’s a trivial portion of revenues. What Facebook actually sells is the ability to advertise to people. Thus all that revenue is part of the advertising industry, not the data one. Same with Google. And so on – to the point that the value of data is some rounding error when compared to the oil industry.

It’s one of these things that everyone knows, that data is the new oil, which is also a collective delusion.

12 thoughts on “Nonsense”

  1. Isn’t this to palter somewhat? Shirley, the value of the advertising arises because of the data…

  2. @ Edward Lud

    Shirley, if you take a raw material (data) and add value to it (the targeted demographics the advertisers wanted) then the input is not what the costs are based on.

    Coffee bean growers in Africa don’t capture all the value of a decent brew in the 1st world for the same reason.

  3. I’m not sure if you’re really disagreeing with me, Mr Yan.

    Even if we can notice and quantify added value along the food chain, the fact is that neither the brew nor the advertising would exist without the grower or the data.

  4. But the point is, what is the value of each part of the chain?

    There are some who divide Facebook’s revenue by the number of users and come up with a figure of $X,000 for the value of the data. On this measure, it’s worth more than oil.

    Problem is the data (at least individually) is worth pennies (cents) – it’s the aggregation that is worth thousands.

  5. it’s the aggregation that is worth thousands. rather like mining, as our host tells us, there is ore and there is dirt.

  6. To what extent is the data valuable simply because it’s switched the advertising revenue from firms that have a wee bit of data about their general audience demographic (TV stations and newspapers, and advertisers using them, had some clue what age and economic segments they’re reaching) to firms that have individual-level data? So a redistribution of the pie, rather than because the data has led to increase in the size of the advertising pie and a substantial increase in advertising’s power to sell stuff to people? (I get that individually targeted ads tend to be more effective – and its effect more quantifiable – than an equivalent untargeted one and this is why advertising has changed the way it has, but it seems plausible people exposed to a diet of targeted ads don’t end up buying any more than they did on a diet of untargeted ones.)

    Looking at the last twenty years as a proxy for the digital advertising revolution, it looks like real ad spend in the UK has risen about 70% (from https://www.adassoc.org.uk/wp-content/uploads/2019/06/Ad-Pays-7-UK-Advertisings-Digital-Revolution-compressed.pdf ) versus real UK GDP rising about 40%. So while data may have transformed the ad industry itself it doesn’t sound like it has been so transformational in terms of its proportionate role within the economy?

  7. What djc says….
    With the difference that in this case data is accumulated in ways that even intelligence services aren’t allowed to do without ministerial approval/court order.

    It’s the integration that allows …well, anyone with enough access to the various databases… to piece together an exact profile of you, including stuff that is most definitely in the private sphere.
    GDPR is nice and all, but the system is stacked against even finding out who is exactly collecting what, especially with what ad-slingers define as “functional cookies”, and there’s a host of tricks to poison quite legitimate and well-meant ads served by the most …decent… ad-slingers.

    The non-decent ones….. ohboi… And they’re not just active on pr0n sites.. In fact those have learned to very strictly limit what happens on their pages, lest Traffic (and revenue..) goes *Poof*. Funny how the most derided (and staple) sector of the internet at least has its act together on this.
    The worst are still the “free” sites with pirated content, especially the dodgy stuff, and the host of clickbait blogs.

    And most sites have gotten wise to blockers and PiHoles, so ymmv nowadays.

  8. MBE,

    “To what extent is the data valuable simply because it’s switched the advertising revenue from firms that have a wee bit of data about their general audience demographic (TV stations and newspapers, and advertisers using them, had some clue what age and economic segments they’re reaching) to firms that have individual-level data? So a redistribution of the pie, rather than because the data has led to increase in the size of the advertising pie and a substantial increase in advertising’s power to sell stuff to people? (I get that individually targeted ads tend to be more effective – and its effect more quantifiable – than an equivalent untargeted one and this is why advertising has changed the way it has, but it seems plausible people exposed to a diet of targeted ads don’t end up buying any more than they did on a diet of untargeted ones.)”

    There’s some redistribution, but there’s also a lot of niche advertising that’s appeared. I used to advertise my particular software services, which weren’t “building software” but right down to the particular tech that I used. That was never possible before. Even business publications were broader than that. I see it with various FB ads I get from real niche companies. Not a company selling blu-rays, but a company selling Asian horror blu-rays. The one killer thing about this advertising is the analytics. You can trace your ads through to a target, like buying something or contacting you. I ran lots of ads that got people visiting, but didn’t give any contact, so I stopped them. TV, poster and radio costs a lot of money to measure the effects.

    One reason FB is largely ignoring the anti-Trump based attacks on well known brands is that a lot of their ads aren’t Arial or Hovis, it’s people like (looks at my FB): Sake Network (get Japanese Rice wine delivered), electric Vespa motorbikes, engagement rings, someone selling bass guitar lessons, Swatch. I also have Nintendo in there, but that’s the only big name.

  9. @bom4

    Yes I’ve mentioned the large number of small-name advertisers on FB before when discussing with people how effective the FB boycotts are likely to be.

    Also had similar experiences advertising one of my very niche freelancing areas. I know for me digital advertising made it easier to get clients globally when I went solo but once I was established and had a reputation more came from my networking. Am curious what effect it has had on the economy overall – from my personal experience, it may have suited the rise of small and microbusinesses with tight specialisms but potentially more global reach; how much of the world’s economic story of the last two decades that constitutes, whether it has even been a new and distinct trend or more the continuation or acceleration of existing ones, I’ve no idea.

    The flip side of these microtargeted FB and Google ads (though apparently this doesn’t stop most people) is that personally I find it extremely creepy when I see how well I’m being targeted because it means they must “know”, by aggregating bits and bobs together, an extraordinary amount about me. I’m not on FB and more privacy conscious re google as a result, as are some other folk I know. Cf Grikath’s post….

  10. MBE,

    “Also had similar experiences advertising one of my very niche freelancing areas. I know for me digital advertising made it easier to get clients globally when I went solo but once I was established and had a reputation more came from my networking. Am curious what effect it has had on the economy overall – from my personal experience, it may have suited the rise of small and microbusinesses with tight specialisms but potentially more global reach; how much of the world’s economic story of the last two decades that constitutes, whether it has even been a new and distinct trend or more the continuation or acceleration of existing ones, I’ve no idea.”

    Good question, and I don’t know. But I see The Long Tail in all sorts of places. Like books, music, YouTube. My kids will order a shirt from some seller in China that they see on Instagram, rather than going to M&S or Etam.

    I’m not sure how much effect that has on the economy as a whole, but it probably has a greater effect around advertising.

  11. @bom4

    Yes the long tail is an interesting comparison point, niche targeted advertising certainly has a role in that – just had a peek at Chris Anderson’s original book (2006) as part of an effort to see how valuable the tail might be, I know there’s much more recent research but it was very striking how all three of his main examples look so dated now. Netflix (for film rental then) versus Blockbuster. Amazon versus Borders for books. And one where reality turned out more ambiguous… for music, Rhapsody (these days with the Napster name, and a very minor streaming service transitioning to a more B2B approach) versus Wal-Mart (back then still with hyphen and still an important player in the music industry in a way that’s waned now: https://www.ft.com/content/154d4910-65b8-11e8-90c2-9563a0613e56 ). But then I’m not sure how much of the transformational side of digital retail is the long tail stuff and how much is the more prosaic business of expensive rents, shop floor staff and increasingly outdated business models (and even, in the cases of movie rental and music especially, outdated physical products).

  12. TAKE THAT

    Zajaxian Planetary Law required that war, if it must be fought, be fought not with bombs, bullets and blood, as on our own primitive Earth, but with serried banks of immensely powerful mainframe computers, even though they were bulky to carry and unwieldy to throw.

    ~ Jeremy Das, Dishonorable Mention, 2019 Bulwer Lytton Awards

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