The Value of Customer Data for Business

As technology has evolved, so has the extent to which companies look to personalize their products and marketing techniques — and for good reason. Understanding what a customer wants and needs has become synonymous with understanding a customer in terms of quantitative data. In the age of consumer-focused sales, how much is an individual’s data really worth?

The Big Business of Data

There is a strong correlation between market share and the use of new technologies, data, automation, machine learning, and innovation. Perhaps the most valuable of these is big data. 5 out of the 6 biggest companies by market cap validation are data technology businesses.

However, the value of data not only reveals its impacts on the level of multi-national corporations. In fact, business analytics and business intelligence solutions can be leveraged by any business to yield continued growth. Effective data management can give a business a competitive advantage, reduce operational costs, predict behaviors and increase revenue. However, the multitude of economic advantages data offers does not necessarily mean that they are yet viewed as an accountable asset.

What are Customer Data Actually Worth?

In 2016, Microsoft bought LinkedIn for $26.2 billion, the biggest deal in Microsoft’s history. The professional network had 443 million users, 100 million of which were active every month prior to the acquisition.

Why did Microsoft spend so much money on LinkedIn? The short answer is that LinkedIn is a treasure trove of data. It knows where people work, their ambitions, where they went to school, and what their interests and skills are. This provided Microsoft with the ability to transform instantly into a B2B marketing and advertising data authority.

Viewing the deal as purely a data acquisition would value a monthly user at $260. While the deal shows an agreed data price, at least where Microsoft and LinkedIn are concerned, it was open to much criticism. It was this deal that led the credit rating agency, Moody, to conduct a review of Microsoft’s credit rating.

While it is clear that consumer data is a hugely valuable resource, this doesn’t coherently identify the universal price at an individual level. One reason for this lack of clarity is due to the current GAAP accounting standards, which regard data as an intangible asset that therefore cannot be capitalized on the balance sheet. However, the research firm Gartner predicts that this will all change soon, with companies being valued on their data information portfolios by 2022.

Putting a Value on Data

James Short offers a comprehensive evaluation of data value, stating it lies in a few distinct areas:

  • The stock value
  • The activity value
  • The predicted future value
  • The prudent value

Regardless of whether data are currently being regarded as assets and noted on a balance sheet, effectively managing, deploying, and collecting data can hugely impact the success of a business. The influence of these practices is visible in areas such as returns on investments, using data to create new products, improving customer relationships, working on user experience, and business growth.

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