Why the Auto Industry’s Data Monetization Strategy is Due for a Change
Two years ago Intel called data the new oil, declaring that “Data is truly the new currency of the automotive world.” Data monetization has a place in the development strategy of virtually every company in every field.
As the process of transforming data into currency, monetization can take the form of the direct sale of data. There is also indirect monetization — the process of extracting benefit by way of business optimization, i.e. using data to fortify and build partnerships, reduce risk, and increase financial efficiency.
Almost every business has the ability to monetize its data. It doesn’t have to involve the literal sale of that data.The Stanford Marshmallow Experiment proved that choosing delayed rewards can lead to greater benefits.
Why is selling data ineffective?
There are only few companies that are interested in buying data right now. The main buyers of data are insurance companies that can use data as a basis on which to develop certain products with dynamic pricing, where the price depends on specific vehicle telemetry parameters. These could include how fast a driver drives, whether they drive in the city or the country, how aggressively they drive, and how carefully they follow traffic laws.
However, aside from insurance companies, I don’t think we can find very many other firms that would be interested in paying a significant amount of money for our data. So, even with all their connected cars, car manufacturers can’t make as much money from their data as they’d like to unless they sell it to insurance companies. And, given the institution of the GDPR and the social tension surrounding the topic of data as a whole, selling data just doesn’t seem very attractive. So, instead of selling data, establish partnerships. We know that car manufacturers strive to improve drivers’ quality of life. By creating an ecosystem that attracts third-party service suppliers and exchanging data with them, we can improve our customers’ quality of life. Thanks to the monetization of this ecosystem, a car manufacturer will be able to make money off of data. This is the delayed reward from the Stanford Marshmallow Experiment.
An automaker can’t satisfy all of its customers’ needs and make full use of anonymous data by itself. However, if it has an ecosystem in which it can work with outside partners, data monetization can really take off. For example, if a pizzeria that a driver frequently goes to gets data about the driver’s location just as he’s driving by, the driver will get an offer to get a discount on a pizza if he picks it up right then and there, hot and ready to go. This is possible because the car knew that the driver would drive past the pizzeria in 30 minutes. Consumers are willing to pay for that kind of service. And companies such as pizzerias are willing to pay for it too. This isn’t just selling data. As a business model, “just selling data” is doomed to extinction.
How can an automaker organize this ecosystem properly?
To create this ecosystem, a car manufacturer needs to rely on the experience of vendors that create similar partnerships. For example, social networks with lots of apps, smartphone manufacturers with their stores, or banks with their loyalty programs and satellites that are willing to give customers cash back and points. Today there isn’t a single automaker with a long-term loyalty program because motivating someone to buy a second car is difficult and expensive. But what if we make someone loyal within their car’s lifespan and bring them into an ecosystem while making a profit off of transactions within that ecosystem? That’s something a car manufacturer can do, but there are certain risks.
First of all, there’s the risk of threats to cyber-security and the theft of personal data. In order to defend against this, you’ll have to take standard steps such as constantly improving the level of your system’s security and performing penetration tests.
There are also organizational risks, since there will always be certain dishonest players within the ecosystem that could use users’ data for their own illicit ends. I should note that users always consent to the use of their personal data. And if, in the case of social networks, people didn’t appreciate the significance of the box they were checking, when it comes to their car people will pay much closer attention to their data and will only give their consent if they find the service truly necessary and useful.
There’s also the risk of having a small number of players in the ecosystem. If you want to attract a lot of players to the ecosystem, you need to have a lot of users, but if you want to have a lot of users, you need to have a lot of players in the ecosystem. This is where automakers can focus on something specific. Our recommendation is to start with the after market. In other words, connect people not to cars that just came off the conveyor belt, but to ones that are already on the road. The average automaker sells a few million cars a year, but this number is too small for mobile app developers because they’ll only get a few thousand subscriptions when they need tens of millions. So, you need to bet on the aftermarket and try to connect people who are already driving. That’s the kind of ecosystem that players like our company Bright Box will flock to.
We’re a vendor of a connected car platform, and we can connect cars that are already on the road. We can provide automakers with connectivity systems and drivers with interfaces. In addition, we’re part of an ecosystem, since we’re part of the Zurich global insurance group. We can provide products on a dynamic price basis using data from automakers, which will facilitate the development of automakers’ own ecosystems.
