Data Does Not Guarantee Success
Ahead of tomorrow’s Senate Judiciary Committee Subcommittee on Competition Policy, Antitrust, and Consumer Rights hearing on data and competition, it’s important to remember that “data” isn’t a new concept and it certainly doesn’t guarantee business success. Here’s what you need to know:
– Good ideas win, even with little or no data.
– Consumers use many services and share data with many companies.
– Data is widely available – it’s what you do with it that counts.
– Data is used broadly across the retail industry.
– Companies large and small are making progress towards achieving data portability.
Good ideas win, even with little or no data.
TikTok recently overtook Youtube in terms of average watch time, going from nonexistence to “King of Video” in less than five years. TikTok built a superior algorithm and content creation tools without any pre-existing data advantage, becoming the most downloaded app of 2020.
Zoom—an independent company founded in 2013—overtook existing conferencing options offered by the likes of Microsoft (Skype) and Cisco (Webex) by offering a more convenient, cheaper, and user-friendly alternative.
Consumers use many services and share data with many companies.
Rather than lock themselves into one service, consumers like to use multiple products simultaneously—the result is that no service provider can claim a data collection advantage. Here’s economist David Evans: “The number of apps that people can use is limited mainly by their ability to keep track of icons or bookmarks. Many online platforms are available to users for free. Consumers face no significant expense in installing an additional online platform app. Nor must they agree to use an online platform exclusively. As a result of these features, it is easy for people to multihome on several online platforms. They can conveniently switch back and forth depending upon which they prefer for which purpose. It is also easy for people to try a new alternative online platform and decide whether to keep using it or not.”
Data is non-rivalrous — anyone can use it, collect it, re-use it, and find new uses for it, says Jakob Kucharczyk, formerly of CCIA. “Unlike oil, which is used once, then burns up in combustion, data is regenerative, meaning it can be used over and over again. It lives on and gains new life each time it is shared or used in a way that adds value to someone. It builds knowledge, meaning, and value the more it is interlaced with other data. However, data is only valuable if one can derive meaningful insights from it. Large amounts of data is useless if nothing meaningful can be derived from it. That contrasts sharply with oil.”
Data is widely available – it’s what you do with it that counts.
There are diminishing returns to simply collecting data, says University of Florida professor Daniel Sokol. “It’s not how much data you have, it’s what you do with the data where there seem to be diminishing returns on data size, and we’ve seen that, in terms of companies that have lots of data don’t use most of it.”
Data is generated in myriad ways, many of which could produce information more actionable than that produced by, for example, Google Search, write Nick Dadson, Iain Snoddy and Joshua White of the Analysis Group. “In addition to the current alternatives to Google Search, potential alternatives may be developed. Innovative companies often find novel ways to use existing data differently or to obtain data from different sources to compete. For example, while a manufacturer of smart refrigerators may use its data to predict individuals’ dietary habits, a supermarket may try to do the same through an analysis of credit card traces.
Access to data is becoming increasingly democratized: the Common Crawl project, for example, contains petabytes of web-scraping data collected since 2008, which can be accessed for free.
Data is used broadly across the retail industry.
Using data to improve sales and customer experience has been a common practice in retail for decades, writes tech analyst Benedict Evans. “Amazon knows what you search for, but Safeway can put milk at the back of the store and candy next to the till. Amazon uses placement to steer purchasing, yes, and so do all retailers. Amazon uses data, yes, and so do all retailers – Walmart bought its first computers in the 1960s, and Tesco owns the leading loyalty card business. Retailers do, in fact, know what they sell. And no, Amazon does not have a different kind of scale.”
It is “common practice” for retailers to use data, and they’ve been doing so since the early 1900s, writes Alec Stapp. “It is common practice for retailers, including grocery stores and department stores, to use data to develop their own store brands to directly compete with name brand products. As Benedict Evans, an independent analyst, put it in reaction to the story, ‘It can be pretty entertaining to watch critics of Amazon discover ‘retail.’ The practice of using information about which products are selling well to develop private label goods is nearly as old as the retail industry itself. Sears launched its catalogue business in 1888. By 1927, the retailer was selling its own tools and appliances under the Craftsman and Kenmore in-house brands.”
Costco uses customer data to personalize the shopping experience for each shopper. “Data analytics has greatly transformed Costco. To begin with, data analytics facilitates the delivery of shopping experiences that are aligned with the needs of individual customers. The company analyzes customer characteristics such as ‘loyalty, past purchases, cross-channel preferences, and service incidents to gain a consolidated view.’ This enables its sales associates to provide personalized services such as identifying customers by their names, thereby enhancing customer loyalty.”
Walmart uses big data to predict consumer behavior. “Walmart tracks and targets every consumer individually. Walmart has exhaustive customer data of close to 145 million Americans of which 60% of the data is of U.S adults. Walmart gathers information on what customer’s buy, where they live and what are the products they like through in-store Wi-Fi. The big data team at Walmart Labs analyses every clickable action on Walmart.com-what consumers buy in-store and online, what is trending on Twitter, local events such as San Francisco giants winning the World Series, how local weather deviations affect the buying patterns, etc. All the events are captured and analysed intelligently by big data algorithms to discern meaningful big data insights for the millions of customers to enjoy a personalized shopping experience.”
Companies large and small are making progress towards achieving data portability.
Companies including Google, Microsoft, Mastodon, and Solid are working together on the Data Transfer Project. The initiative, which has since added Apple as well as smaller tech companies including Mastodon and Solid to its list of backers, aims to radically reduce the barriers preventing consumers from being able to transfer their data across platforms. The project aims to give consumers greater control of their data and “can make it easier for them to choose among online service providers.”
Data portability efforts are also taking hold among academic researchers. MIT’s project, “Solid,” aims to create “decentralized social applications” that will allow individuals to move their information wherever they choose and “avoid vendor lock-in by seamlessly switching the apps and personal data storage servers, without losing any data or social connections.”
Google enables users to export all their existing Google data via Google takeout, which Business Insider describes as “a service that takes all your existing Google data and packs it together into one file.” “It’s essentially a collection of everything you’ve ever done with your Google account — this includes all the pages you’ve saved, the YouTube videos you’ve watched, the Drive files you’ve uploaded, and more. Saving your data using Google Takeout won’t harm your accounts in any way. You’ll simply receive .zip or .tgz files filled with all your data. This is great for making backups.”