*Marcelo Lombardo
Big Data is changing the world, and if you still don't know what it is, before continuing read my previous article that explains in a quick and objective way what Big Data is, by clicking here. Without reading this, you will certainly not understand very well from here on out.
Big Data can help humanity a lot. The possibilities are exciting, and that's enough naivety for today. In every great revolution in history, the question has always been asked: but who profits from it? – and Big Data is no different.
To find out, we have to understand the Big Data value chain, which is made up of three distinct layers:
1 - The raw data, which are unstructured sets of information in large volume, such as the telephone call histories of an operator, the history of people's Internet browsing, the daily sales movement of a supermarket chain, information about the behavior of people on social media, and so on. In some cases, this is seen as useless or disposable information by its owner, and goes to the trash can.
2 – The technical ability to process data, which requires high-capacity and high-performance hardware, specialist software and, above all, brilliant minds to create algorithms.
3 – Ideas of what to do to explore commercially. Because all this is worthless if we have no ideas on how to use it.
Knowing this, place your bet now: where do you think the money is? In data, technology or ideas?
To answer that, I'm going to tell you a story about a guy named Oren Etzioni. This guy realized that airfare prices vary a lot over time, and that's not linear. Sometimes you get a better price the day before the flight than a month before. Simply “buying before” does not mean “buying cheaper”, contrary to popular belief.
Oren used a database with hundreds of thousands of historical flight prices and created algorithms with his team that can predict how far in advance you should buy a ticket from anywhere to anywhere, paying the lowest price. With that, he created an online service called Farecast.com, which got the best price in more than 90% of cases. It was a tremendous success, and Microsoft ended up buying his company in 2006 for somewhere between $75 and $115 million (the exact amount was never revealed).
In other words, he used a great idea and simply paid for the technology. This means that ideas for using and selling data are worth more than the technology, which can be purchased or hired.
But wait. The story is not over. Two years later, Google bought ITASoftware, the company that provided the data to Farecast.com for $700 million. And now, who is the good one? Answer: having the data is the most valuable of all.
But wait a minute, I have one more story, this time from Jeff Bezos, the legendary owner of Amazon.
Amazon.com, in its infancy as an online bookstore, grew thanks to a bank of literary critics turned celebrity, at least for a while. These guys were the biggest influencers on the American readership with their book reviews and suggestions, which made the online store's sales skyrocket. But why "for a while"? Because their techs found they could use algorithms that analyze all of the store's historical customer buying and behavior data to predict "which book each person will want to read next." When they put the new suggestion system on the air, surprise: the online store's sales tripled, and the illustrious panel of critics ended up being dismissed.
Moral of the story:
– If you sell the technology to Big Data, you will never have an extraordinary profit. Technology is increasingly a commodity.
– If you have a genius idea of monetizing data usage, you can earn a lot of money for a while. But how long? As long as the owner of the data doesn't realize you're making big money out of his trash can.
– If you are the one who owns the data, you have the tap of any idea in your hand, and the position tends to be very profitable with the least effort.
– The only thing more profitable than having the data is having everything: the data, the technology and the ideas, just like Amazon.
But the article is about making money from big data, right? So here's the tip, based on the stories above: keep all the digital history of everything your business does, no matter how useless that information may seem. Save EVERYTHING. This includes web site access logs, what was shown on every page when clicked, and most importantly, every interaction with the customer. Make more room for this interaction to take place and also continue in the post-sales.
This information may in the future be the missing piece in your or someone else's puzzle. Want to see an example?
Recently, the same Jeff Bezos of Amazon bought the Washington Post newspaper. He paid dearly for a company facing bankruptcy. Why did he do it? My answer: to get your hands on the history of behavior and interests of the newspaper's online readers, because when it crosses that with Amazon sales, it will be able to predict which products will sell more tomorrow or next week, based on in the news accessed today by readers.
So, remember the tip: storage space is cheap these days, so save everything. Maybe one day you'll have a fantastic idea how to use this information, or maybe sell it to someone with an idea, and maybe you'll even remember me right now and want to make a 10% donation.
Very successful (and don't forget my 10%).
*Marcelo Lombardo, founder of NewAge Software S/A, inventor of the CoreBuilder platform and architect of NewAge ERP and Omie software.
Big Data can help humanity a lot. The possibilities are exciting, and that's enough naivety for today. In every great revolution in history, the question has always been asked: but who profits from it? – and Big Data is no different.
To find out, we have to understand the Big Data value chain, which is made up of three distinct layers:
1 - The raw data, which are unstructured sets of information in large volume, such as the telephone call histories of an operator, the history of people's Internet browsing, the daily sales movement of a supermarket chain, information about the behavior of people on social media, and so on. In some cases, this is seen as useless or disposable information by its owner, and goes to the trash can.
2 – The technical ability to process data, which requires high-capacity and high-performance hardware, specialist software and, above all, brilliant minds to create algorithms.
3 – Ideas of what to do to explore commercially. Because all this is worthless if we have no ideas on how to use it.
Knowing this, place your bet now: where do you think the money is? In data, technology or ideas?
To answer that, I'm going to tell you a story about a guy named Oren Etzioni. This guy realized that airfare prices vary a lot over time, and that's not linear. Sometimes you get a better price the day before the flight than a month before. Simply “buying before” does not mean “buying cheaper”, contrary to popular belief.
Oren used a database with hundreds of thousands of historical flight prices and created algorithms with his team that can predict how far in advance you should buy a ticket from anywhere to anywhere, paying the lowest price. With that, he created an online service called Farecast.com, which got the best price in more than 90% of cases. It was a tremendous success, and Microsoft ended up buying his company in 2006 for somewhere between $75 and $115 million (the exact amount was never revealed).
In other words, he used a great idea and simply paid for the technology. This means that ideas for using and selling data are worth more than the technology, which can be purchased or hired.
But wait. The story is not over. Two years later, Google bought ITASoftware, the company that provided the data to Farecast.com for $700 million. And now, who is the good one? Answer: having the data is the most valuable of all.
But wait a minute, I have one more story, this time from Jeff Bezos, the legendary owner of Amazon.
Amazon.com, in its infancy as an online bookstore, grew thanks to a bank of literary critics turned celebrity, at least for a while. These guys were the biggest influencers on the American readership with their book reviews and suggestions, which made the online store's sales skyrocket. But why "for a while"? Because their techs found they could use algorithms that analyze all of the store's historical customer buying and behavior data to predict "which book each person will want to read next." When they put the new suggestion system on the air, surprise: the online store's sales tripled, and the illustrious panel of critics ended up being dismissed.
Moral of the story:
– If you sell the technology to Big Data, you will never have an extraordinary profit. Technology is increasingly a commodity.
– If you have a genius idea of monetizing data usage, you can earn a lot of money for a while. But how long? As long as the owner of the data doesn't realize you're making big money out of his trash can.
– If you are the one who owns the data, you have the tap of any idea in your hand, and the position tends to be very profitable with the least effort.
– The only thing more profitable than having the data is having everything: the data, the technology and the ideas, just like Amazon.
But the article is about making money from big data, right? So here's the tip, based on the stories above: keep all the digital history of everything your business does, no matter how useless that information may seem. Save EVERYTHING. This includes web site access logs, what was shown on every page when clicked, and most importantly, every interaction with the customer. Make more room for this interaction to take place and also continue in the post-sales.
This information may in the future be the missing piece in your or someone else's puzzle. Want to see an example?
Recently, the same Jeff Bezos of Amazon bought the Washington Post newspaper. He paid dearly for a company facing bankruptcy. Why did he do it? My answer: to get your hands on the history of behavior and interests of the newspaper's online readers, because when it crosses that with Amazon sales, it will be able to predict which products will sell more tomorrow or next week, based on in the news accessed today by readers.
So, remember the tip: storage space is cheap these days, so save everything. Maybe one day you'll have a fantastic idea how to use this information, or maybe sell it to someone with an idea, and maybe you'll even remember me right now and want to make a 10% donation.
Very successful (and don't forget my 10%).
*Marcelo Lombardo, founder of NewAge Software S/A, inventor of the CoreBuilder platform and architect of NewAge ERP and Omie software.
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