When you think of data monetization, you may picture corporations such as Facebook or Google that directly use customer data to drive economic benefit. However, monetizing customer data is no longer only for large corporations—nor is it confined to the direct sale of customer information.
Every business, no matter its size or industry, can benefit from some form of monetizing customer data. In this article, we discuss the different types of monetization and how to know which to apply in your business.
What is Data Monetization?
Data Monetization is the process of increasing the economic value of data to provide monetary benefits to a business. This is typically done either through selling data for economic gain or by leveraging data to improve business operations.
Data Monetization is typically divided into two categories: internal monetization, which refers to using data collected to make business optimizations to improve the efficiency and profitability of a business, and external monetization, which refers to selling data to third parties.
All Companies Can Benefit from Internal Data Monetization
Internal data monetization is a strategy that all companies, regardless of size and industry, can implement. It requires collecting and organizing business data, analyzing this data, and transforming it into actionable business insights. For most companies, this means implementing business intelligence software.
With the proper tools and analysis, this internal data monetization can benefit a company by:
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Improving customer loyalty, retention, or average transaction amount
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Increasing profit margins and/or revenue
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Optimizing operations for more efficient and effective production
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Reducing unnecessary expenses or cutting unprofitable products/services
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Or even reducing employee turnover & training/recruitment costs
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And more
Internal data monetization is a more accessible form of data monetization since you are not actually selling data to a third party. This means there are fewer laws and regulations to navigate, if any.
Some Companies Can Monetize Customer Data Externally
External data monetization includes using data to create new revenue streams. This may include:
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Including analytics as part of your offering to clients
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Selling data to third parties
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Selling insights derived by data
While external data monetization may not be the right fit for every company, there is often more opportunity than many companies realize.
To determine whether external customer data monetization is right for your company, consider the following:
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Determine the value of your data.
What type of data do you collect or could you collect? What is its value to third-party partners, current customers, or potential clients? How would you need to format the data for it to be attractive to these third parties?
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Consider additional data.
Is there any additional publicly available information or purchased information that you could use to increase the value of your proprietary data?
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Know the laws and regulations of your industry.
Before selling customer data, you should have a clear grasp of the laws and regulations of your industry. Certain privacy rules may restrict you from sharing or selling certain information, while others may have steps you must take to inform users that their information may be shared or sold. Before monetizing customer data, you should thoroughly understand your legal limitations.