You know that consumer data has arrived when the investor class is trying to figure out how to value it in their spreadsheets. That is the gist of a fascinating column this weekend from the Wall Street Journal. An issue that has occupied online media buyers for years: How much is that data point worth in this ad stack, anyway? I recall at one of our first OMMA Data-Driven Marketing events a couple of years ago, several data broker executives admitted that data was worth pretty much whatever advertisers were willing to pay for it.
Well, now the real value of data to a modern corporation is attracting the attention of serious investors. Information assets pose a problem. How do you value them in M&A? In the WSJ story, Gartner analyst Douglas Laney quips that companies have “better accounting for their office furniture than their information assets.” One economist at the Federal Reserve Bank of Philadelphia estimates corporate holdings of so-called “intangible assets” (including patents, copyrights and data) are probably north of $8 trillion. Laney estimates that grocery store chain Kroger pulls in over $100 million a year selling data to its CPG vendors.
One of the challenges of accounting for data in the corporation is how to book it: as a straight cost or as an investment. The Financial Accounting Standards Board has taken up this issue now for the third time in the last decade, but with no recommendation yet. The value of data is variable and contingent in part on recency. Consumers are moving and evolving, aging, changing. The data points they cast off do not have inherent value apart from how and when they are used. Calculating the current and future value is thorny. But for some digital companies like Google and Facebook, data is their core value that is not reflected by typical financial reporting and disclosures.
The WSJ article cites recent valuations of data and associated property in mergers and acquisitions. In Nielsen’s acquisition of Arbitron, for instance, the $1.3 billion purchase price valued intangibles, including data and customer relationships, at $271 million.
Over a year ago, Gartner argued that the sheer cost of collecting and storing data at major companies would force them to monetize these assets. Gartner predicted 30% of companies would find ways to directly or indirectly monetize their data by 2016, by selling it outright or through some sort of trading or marketing relationship with others. And since most companies are having a hard enough time learning how to use the data properly themselves, even fewer will be adept at knowing how to package and resell it. Look for a new class of information reseller to add to the Luma chart.