data monetization

What is data monetization?

Data monetization is the act of turning corporate data into currency. The currency can be in the form of actual dollars, but it also refers to data used as a bartering device or a product or service enhancement.

The term data monetization has risen in lock-step with trends like big data and the internet of things. As C-level executives continue to recognize the value of data, and as the world continues to be instrumented with sensors and real-time analytics, data will continue to be a booming business.

Data monetization in practice

But precisely how the term is defined can differ from one person to the next. Doug Laney and Olive Huang, two researchers from Gartner, for example, refer to data monetization practices as either direct (data sold or traded) or indirect (data becomes the foundation for new product or service offerings). They point to Walmart with its Retail Link trading portal and Alibaba with its targeted personal finance offerings as two companies that have successfully built data monetization opportunities.

Barbara H. Wixom, principal research scientist at the MIT Center for Information Systems Research, on the other hand, suggests there are three distinct ways to monetize data. In her 2014 research note "Cashing in on your Data," she listed the three data monetization approaches as selling, bartering or wrapping.

Selling data outright, something retailers have been doing for years with point-of-sale or customer loyalty data, is a way to introduce new revenue streams to the company. When bartering, data is exchanged for goods or services such as reports or benchmark metrics, according to Wixom.

Finally, companies that include data offerings with their products at no added charge are wrapping products in data. "The desired outcomes of wrapping include increased market share, wallet share, switching costs and prices," according to Wixom's report.

Along with its potential, data monetization introduces challenges businesses won't be able to ignore. Businesses will need to comply with legal and regulatory constraints when selling or bartering with data.

They'll also have to consider the tricky area of data privacy, which can attract or deter customers, depending on the company policy.

This was last updated in October 2021

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