The Financial Bonanza of Big Data
Every year, Amazon.com earns billions of dollars in revenue from its "personalization" technologies, such as product recommendations and computer-generated emails, that are estimated to account for as much as one-third of all sales. The amount of data needed to feed these tools is mammoth. But its value on Amazon's ledger? Zero.</br></br>Similar stories repeat across the economy. Google can answer search requests in three-tenths of a second because it indexes and stores multiple copies of the entire World Wide Web on its servers. Its search system can predict a query before it is fully typed based on aggregating the billions of searches it gets each day. And yet, though Google puts a value on its hardware, software, patents and research expenses, there is no good way to calculate the value of its data, even as it is central to the company's success.</br></br>"Big data" -- the vast quantity of information now available thanks to the Internet, and which can be manipulated in ways never before possible -- is becoming a backbone of corporate performance and economic growth. Yet its value isn't well understood.</br></br>One reason is accounting rules, which have trouble handling intangibles. Ephemeral things such as brands are usually counted as an asset when one is purchased, since there has been a market transaction to give it a monetary worth. They cannot easily be recorded on the books when a company develops them internally. This is usually the case with data, too.</br></br>The stock market can capture some, but not all, of this sort of value. What is Facebook's $67 billion market capitalization, after all, if not a bet on the commercial usefulness of the information it holds on one-seventh of humanity? But this presumes that investors in the aggregate are savvy enough to price into the shares the economic potential of the data's future earnings.