• So, What’s Your Data Worth?

    March 20, 2012 • Uncategorized • 2 Comments

    A recent technology post by Alexis Madrigal, senior editor at The Atlantic, suggests that the value of an individual’s data is somewhere between a nickel – 5 lowly cents – and a whopping $1,200.00. All of which makes for an interesting read, but what does it really mean?

    The first clue is in understanding how Alexis arrived at his upper and lower bound. As Alexis points out, to a buyer a given individual’s information is worth about 5 cents. Add up all the various pieces of demographic information available about the individual, and according to a RapLeaf price list posted by Forbes, your complete profile is worth just under $1. Sounds pretty inexpensive, so what’s the big deal?

    At the other end of the spectrum, there are roughly 250 million internet users in the United States, who in turn generate $300 Billion in economic activity, or 2.1% of the U.S. gross domestic product (GDP). Do the math, and that’s $1,200. of economic value per user. Somewhere in the middle are Facebook and Google, at between $5 and $20 per user in valuation.

    So what’s your data worth? By this point, if you’re confused you’re not alone. But there’s hope.

    “Lies, Damn Lies, and Statistics”

    The above is a favorite apocryphal quote of college students and business people alike, mistakenly attributed by Mark Twain to Benjamin Disraeli. But, it clearly makes the following point:  When analyzing data, statistics can as easily lead one astray as they can lead one to the truth.

    Here’s a second clue: When a buyer purchases your data for 5 cents from RapLeaf, (or Acxiom, or BlueKai, or eXelate, or Amazon, or any one of a dozen other data marketers), they’re taking a shot in the dark. It’s a guess that you’re going to be interested in whatever they are advertising, selling, or otherwise promoting. It’s probably an educated guess, based on some detailed demographic analysis and assessment, but it’s still a guess. The retailer or advertiser who bought your name is playing the odds – they’re statistically betting that the needle they’re looking for is hiding in the haystack of personal data they just bought.

    At the other end of the equation, if you add up the economic throughput, and divide by the total number of users (i.e., $300 Billion / 250 million), you end up with the average value or benefit. At that point, the outcome is known – it’s no longer a guess. Said differently, to an internet retailer, getting a “hit” in response to an online ad placement or an email offer is worth, on average $1,200. A miss costs 5 cents. At 5 cents a shot, I can afford a lot of misses in order to find one hit. Once again, they’re betting on the statistics.

    Now consider this – the average value of all those users was $1,200. As a simple arithmetic mean, this doesn’t tell us much about the distribution of user valuations, other than obviously some users were worth more and some were worth less. For every shopper who purchased the Ferrari FF from the Neiman Marcus 2011 Christmas Book ($395,000. plus tax and destination), I’m certain there were hundreds (thousands?) who had to content themselves with the Whitman’s Chocolate Sampler ($9.99 + tax, Walgreen’s.)

    So, What Have We Learned So Far?

    What’s important in establishing the value of personal data is context. At 5 cents (or even $1), your value is a shot in the dark.  You might be worth $1,200, or even more, but that information is ambiguous – it lacks context, often until the outcome is known.  Knowing up front who has the economic means, the propensity, the inclination and the intention to order the Ferrari FF is more valuable to Neiman Marcus than identifying those individual Whitman’s Sampler customers is to Walgreen’s.  But consider that both Neiman Marcus and Walgreens paid the same $.05 up to $1 per name to identify their prospective customer.

    Now, imagine that you control your data.  You control who sees it and when they see it.  You provide added validation regarding the accuracy of demographic, economic, and personal information.  And you provide context – what your intentions and timeframe are, as well as your brand and other preferences, and even typical usage behaviors.  Sounds valuable, right?  It is.  Instead of taking a scattered, shotgun approach and sending out a million emails and ad placements, at a cost of $50,000. plus the expense of the ads and emails themselves, Neiman would happily spend $25,000. for a list of 20 names that would guarantee a sell-out of their allotment of Ferrari FF’s.  And if your name belongs on that list, why shouldn’t Neiman pay you for volunteering that information?

    Needless to say, Neiman Marcus does not produce their annual Christmas Book solely to sell one or two high-end items.  They produce a book that enhances brand image, defines an aspirational lifestyle, and encourages those with excess disposable income to spend it with Neiman Marcus.  Their mailing lists – physical and electronic – are finely tuned.  Production costs for the Christmas Book undoubtedly run to 7 figures, if not higher. It obviously turns a profit, because Neiman is still doing it. But if they could connect with prospective and existing customers in a more efficient and more reliable fashion, they would. Because it’s a hugely competitive market, margins are thin, and hey – Nordstrom’s is just down the mall, and only a click away on the internet.

    The Bottom Line

    Personal data is valuable – no question. How valuable is dependent on three things:

    1. Accuracy
    2. Validation
    3. Context

    Deciding if your data is worth more than 5 cents, and as much as $1,200. or more, is dependent on all three. If we set our lower and upper bounds to the values Alexis Madrigal defined, then in any given situation the valuation is likely somewhere in between. Increased data accuracy and validation, together with context, will drive both endpoints towards a norm.

    More importantly, the single best way to significantly enhance all three attributes of data valuation is through direct consumer involvement. Insert yourself into the equation, and businesses will pay you for the privilege of taking a closer look.

    The choice is yours. If you think you’re only worth 5 cents, then the status quo agrees with you – have a chocolate. If you think you’re worth more, then step up and own your data. Give it validation, keep it updated and accurate, and provide a rich context. And find out just how much you’re really worth…

    2 Responses to So, What’s Your Data Worth?

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