Data has long been described as “the new oil” — and its potential to transform industries and drive growth has been underlined by advances in artificial intelligence this year.

A large and growing industry of companies provide traditional and alternative data to buyers looking to improve their business — almost 2,000 are listed on the Neudata platform.

Companies are constantly asked about how they can use data to enhance their processes and outcomes — but the question of whether their internal data could provide a business opportunity is sometimes overlooked.

This is data monetisation — and it is a huge opportunity. Your company may well be able to use it to generate revenue and future-proof its operations in the age of AI.

“We’ve seen examples of companies that go down the data monetisation path generating additional multi-million dollar revenue streams.” Rado Lipuš, founder and CEO of Neudata.

‍

This blog post, the first in a series of three, will introduce data monetisation and explain the main opportunities and challenges associated with it. Read on to learn more about:

• The data monetisation opportunity
• Data buyers and sellers
• The advantages of selling data
• The challenge of data monetisation
• What is Neudata

THE DATA MONETISATION OPPORTUNITY

Data monetisation is not a new proposition.

According to Deloitte’s 2023 Global Technology Leadership Study, 36% of executives say they’re currently generating revenue from selling data, technology or tech-enabled services — and another 16% expect to in the next two years.

In other words, by the middle of this decade a sizeable chunk of the world’s businesses will be using data monetisation to generate revenue. It's an established business practice which is already being widely pursued.

DATA BUYERS AND SELLERS

Who can be a data provider? There are no fixed rules — the quality of a company’s data offering and its appeal to buyers will be decisive.

Which companies might be most interested in new alternative datasets?

A huge opportunity exists in the investment world — the hedge funds and other asset managers that trade equities, bonds and other asset classes for their investors are likely buyers. Private equity, venture capital and other types of investment firms are also potential clients.

These investment firms are divided into quantitative hedge fund investors, or quants, and discretionary managers.

Quants, also known as systematic funds, were early innovators in the alternative data industry and use data to power complex computer algorithms that identify trading opportunities.

Discretionary investment firms use fundamental analysis. More recently they have begun using alternative data to make better investing decisions as well, typically to supplement the research process and enhance risk management processes.

These businesses are hungry for new datasets to give them an investment edge. Some of the most commonly sourced datasets include:

• Web-scraped/web-crawling data
• Transactional data
• Web- and app-tracking data
• News and event data
• Economic and macro data data

Case study: consumer spending

Here is an example of how data can be used by investment firms. Consumer spending is a key macro indicator which helps build a picture of economic health and future performance.

As noted above, consumer transactional data (sourced from credit/debit cards and e-receipts) is a very popular alternative dataset source in this space.

Breaking down the data by region or sector can be useful for forecasting consumer spending indices and retail sales. This means even a bank — maybe even your credit card provider — can monetise its data. It might well be already.

One very popular vendor on the Neudata platform offers anonymised banking, debit card and credit card transaction data from 20 million consumers, updated daily, while another offers point-of-sale data for consumer packaged goods, covering 900 thousand stores across 85 countries.

ADVANTAGES OF SELLING DATA

On top of boosting revenues, being in a strong enough position to sell data can boost a company in several other ways. For instance, data can improve a company’s financial strength by being added to the balance sheet.

Considered an intangible asset in the past, there is an increasing consensus that companies should value their data the same way they value other assets, from real estate to software licenses.

“In a data-driven world, companies with data assets listed on their balance sheets will look more attractive to potential acquirers.”Rado Lipuš, founder and CEO, Neudata.

Also, having better organised data throughout a company can drive efficiencies and enhance tech knowledge across teams. That will enable internal AI strategies and tools, and help the shift to a data-driven decision-making culture.

Companies don’t want to be left behind. One-third of respondents to McKinsey’s Global Survey on the state of AI (conducted in April 2023) say their organisations are using generative AI regularly in at least one business function.

That shows the rapid pace of uptake, given how recently many generative AI tools have started to become available. But it’s not hard to see why. Data can also provide better visibility into performance across the organisation.

The advantages of pursuing a strong data culture — even beyond potential monetisation — are myriad.

THE CHALLENGE OF DATA MONETISATION

Companies new to data monetisation may take some persuading that it is a viable option for them.

If solid data practices are in place internally, it should be relatively straightforward to source and structure data. The challenge will be to identify potential data customers and understand how they will want to use the data in their decision-making processes.

Wondering how to price your alternative data? There is no rulebook here — the most important factors to consider are the uniqueness, relative scarcity and investment idea-generating potential of your data.

This is a good time to explore the competitive landscape through an alternative data specialist such as Neudata, which hosts research on thousands of  individual datasets. This will provide a great idea of the range of data providers out there and the products they are offering.

Furthermore, Neudata can provide intelligence on the unique use case and application of a proposed data product.

There are also confidentiality and compliance issues which sellers need to consider. Who owns the end data? How will this new business offering be explained and communicated to existing clients?

Remember, the alternative data space is a highly regulated industry for investment managers, so legal ramifications will have to be explored from their perspective.

HOW NEUDATA CAN HELP

As these challenges demonstrate, the idea of becoming a data provider may seem daunting, even for a company with strong data processes and a unique product to sell.

“Neudata is ideally placed to consult on data monetisation and help companies create new revenue streams to future proof their businesses.” Rado Lipuš, founder and CEO, Neudata.

Neudata has a consulting division which helps companies establish whether they have sellable data. The unit can help:

• Assess the value of data
• Determine what products a company could build with their data
• Provide use cases and rank their market potential
• Advise on compliance or data aggregation required to enter the market
• Help structure data collection and contracts to be compliant and/or have ownership at an aggregated level

It is an end-to-end service built on five strands, from market introduction to in-life management once a data product is being actively sold on the market.

Why is Neudata in a strong position to help companies enter the data monetisation market?

Neudata is an alternative data-focused research platform that specialises in the objective and neutral assessment of data vendors and datasets. We help institutional investors, corporations and leading global organisations find the most relevant alternative data sources to use in their internal data ingestion processes.

The Neudata platform is the global authoritative source for unbiased, independent alternative data intelligence. It captures 90% of global alternative data-solutions supply.

We don’t buy or sell data, or require data providers to pay us a revenue-share or commission in exchange for recommending their products to data buyers. That means users get unbiased intelligence that’s tailored to their specific research goals and strategies.

Since 2016, we have helped our clients understand the landscape of available datasets, increasing the efficiency of their data spending budgets. Neudata’s data buyer clients represent 60-70% of industry-wide spending on alternative data.

It also means we are ideally placed to consult on data monetisation and help companies create new revenues in this field to future proof their business in a tech-driven world.

If you are a data provider and want advice on monetising it, contact info@neudata.co to discover how Neudata can help.

Additional reading:

• Harvard Business Review, ‘4 Steps to Start Monetizing Your Company’s Data,’
• CFO University, ‘Why is data missing from the balance sheet?’
• McKinsey’s, ‘The state of AI in 2023’