Data as a competitive advantage
In 2009, Hal Varian, the Chief Economist at Google, stated that “…the sexy job in the next 10 years will be statisticians. And I’m not kidding.” He wasn’t kidding! There are currently close to 10,000 job postings on LinkedIn for US jobs requiring “Statistical skills” compared to 6,500 for “coding” skills. Facebook alone currently has 18 roles with the title “Data Scientist” or “Data Engineer” open on its jobs page. King, the maker of Candy Crush, has 10 open Data roles.
So why is the data guy or gal such a fad? Lets get one thing out of the way up-front: It’s not because of anyone calling themselves a “Growth Hacker.” It’s because the modern digital economy generates reams of information and that information has deep and defensible value for the companies that use it correctly.
In the late 90's, one of the largest commercial Data Warehouses in the world was First Union’s “massive” 27TB database on which it had spent millions. To put it in context, you can now, 16 years later, buy a 20TB LaCie storage drive for $1800. The creation of data is accelerating, the cost to store it is falling and the algorithms and interfaces to analyze it are rapidly improving.
The scale with which data is being created is best shown visually (courtesy of Mary Meeker)
Data creation is going to continue to accelerate, and this coupled with the lower cost of storage, and more advanced tools for analysis leads to the ability for companies to use data as a competitive differentiator.
I often joke that good gaming companies are big data companies with a gaming front end. Every click, turn, purchase on Clash of Clans is tracked and analyzed with the sole purpose of making the game more efficient (and by more efficient I mean more likely to buy a digital good). As Amazon has proven, e-commerce companies are as much logistics companies as data-analytics companies.
And yet companies large and small continue to under-leverage data as a competitive asset. From one of the largest retailers in Europe who knew that I purchased diapers and beer but never thought to integrate that with the 1.5M followers of their Facebook page. Or the high-profile publisher who had millions of users on its app, but was throwing away all the data it was capturing because of “server costs.” Or the Museum who had data on several million users of its WiFi access points but only tens of thousands of emails in its customer database.
As White Star, we have invested in a number of companies that are building defensible data assets: Busbud who has aggregated data for bus routes across 60 countries and hundreds of thousands of routes; Betaworks who has built a studio around real-time web and real-time data as the baseline for the new media; Summly, who sold to Yahoo! who built an AI engine to combine data signals and analytics to summarize news articles. And we are seeing more and more companies grasping the power of data to identify, engage, retain and monetize audience.
At the same time we meet too many e-commerce, gaming, mobile startups who do not realize, or do not have the capability to realize what an an amazingly valuable asset they are sitting on.
If you do it right, Facebook should give you a deeper demographic insights than you would ever have on a client, Twitter firehose (available at a cost from 3rd parties) provide insight into the conversations, and your own logs, when tracked and mined appropriately have amazingly granular data of every single action your clients take on your site or app. The answer to your acquisition funnel, engagement issues, best customer insights, best cross-selling opportunities are all there waiting to be mined.
I believe that data, if used correctly, enables lower-cost acquisition, better targeting, more engaging re-engagement and upselling and deeper and un-biased insights into what your clients want…and don’t want and actively encourage all of the entrepreneurs that I work with to harness the competitive advantage of data assets.
