The curse of ‘monetisation’

What’s the biggest obstacle to our society’s ability to unleash the full personal, social and economic potential of personal data?

In our experience, one of the prime candidates has to be the quest for ‘monetisation’. This isn’t just about the greed of those trying to make a quick buck. It’s a more subtle, insidious (and therefore powerful) influence coming from many people who genuinely believe that ‘monetisation’ is the only way to make things happen.

Their story goes like this.

To unleash the full potential of a new resource or ‘asset’ like personal data you need to create ‘a market’ where people can make money by buying and selling things. The new market attracts new entrants who ‘innovate’ to create desirable new products and services. This attracts additional users who are prepared to pay for these innovations, which makes the market more valuable. This attracts yet further new entrants; who create even more innovations, and so on. Hey Presto! We have a virtuous spiral where wealth creation goes from strength to strength.

It sounds quite plausible, until you look at what’s happened with personal data over the last decade or so, and start kicking the theory’s tyres a bit.

Cherry orchards vs cherry picking

One important assumption behind the happy picture of market formation and growth is that for the new market to flourish, new entrants must have powerful incentives — namely, the opportunity to make a lot of money (hence the focus on ‘monetisation’).

This focus on monetisation generates a mind-set that skews the priorities people pursue, the decisions they make and the actions they take. It turns them into ‘cherry pickers’. Monetisers don’t want to invest the time and effort that’s needed to nurture a cherry orchard from saplings to maturity. They just want the most profitable bits. They just want to pick the cherries. And when they can’t have their cherries, they can’t see the point of ‘investing’.

Net result? Swarms of would-be innovators and entrepreneurs searching desperately for cherry picking opportunities while nobody actually plants and tends the trees that will make it all happen. The cherry orchard never actually materialises. The ‘market’ never actually takes off. (As our previous blogs explain we think this is exactly what has happened over the past decade with verified attributes and the so-called ‘market’ for identity assurance.)

On top of that, not all innovation is benign. With the wrong social context and institutional framework, innovators gravitate towards taking advantages of imbalances of power, loopholes, opportunities for deception and so on, to extract money from people instead of creating and exchanging value with them. Both can come under the banner of ‘monetisation’.

Markets vs public goods

Another flaw in the monetisation-only model of market growth is the belief that monetisation comes from someone having a ‘thing’ (a ‘product’) that they ‘sell’ for a ‘margin’ .

This encourages a very narrow view of wealth creation. It focuses on just one part of the economic process: the end bit, where you make money by selling an output. And it ignores the other end of the economic process where you make inputs available so that they can be brought together to create the output.

You can’t have a vibrant market for a product until its key ingredients are widely available at low cost. Reducing the costs of inputs, rather than monetising outputs, makes an equally important contribution to economic growth and prosperity, arguably even more so because without this foundation little else happens. (Again, our argument about identity and verified attributes).

Ensuring the availability of key inputs is the traditional role of infrastructure. Economies need things like roads, rail, water supply and electricity to blossom and the cheaper it is to use them the better: because that expands the range and volume of activities that depend on them. The more key input costs go down, the more the rest of society benefits. So perhaps, instead of focusing solely on selling products for a margin (e.g. adding a bit of cost on top), perhaps we also need to develop processes that deliver core utility at reduced cost.

There’s an added twist to this. In a market where you sell stuff, the buying and selling is all about transferring ‘ownership’. Before the sale, one party has exclusive ’ownership’ of the product. After the sale another party now has this exclusive ownership.

But personal data doesn’t work like this. With personal data the concept of ‘ownership’ is problematic. Personal data (like all data) doesn’t get ‘used up’ when it is used. The same bit of data can be used by many different parties to do many different things. This sort of resource doesn’t benefit from exclusivity; it creates most value when it is shared.

But for this to happen you need clear rules of data sharing and use: rules which fairly benefit all those involved and which build trust (rules like ‘Safe By Default’). What this points to, then, is not the need for a take-what-you-can free-for-all ‘market’, but institutions that ensure fairness and build trust. These preconditions for the successful sharing of personal data — fairness and trust — are a public good.

You can’t claim exclusive ownership of a public good, because the ‘good’ only works by being shared. Peace is a public good: it’s not peace if one person has peace but their next door neighbour is waging war. Knowledge is another public good: it doesn’t get diminished by use. And it delivers most value when everybody can use it. Likewise: an infrastructure that enables the fair, low-cost, trust-building sharing of personal data. In this context, attempts to ‘monetise’ personal via claims of exclusive ownership may actively destroy what we need to create.

(Please note: this is not to suggest that personal data itself should be seen as a public good. Personal data is first and foremost the person’s data. But a system that enables the fair, safe, mutually beneficial sharing of such data — e.g. via the right sort of infrastructure and institutions — is very much a public good.)

Tails vs dogs

The one place where monetisation of personal data has really taken off is advertising. The adtech industry has generated a voracious land grab for personal data driven by the belief that gathering ever more data about individuals will improve the targeting of ad messages.

This monetisation model has been extraordinarily successful, making organisations like Google and Facebook amongst the richest companies in the world. But because they shine so bright they tend to dazzle. Sometimes it seems they are the only stars in the firmament, mesmerising all who gaze upon them.

Business executives obsess about how to monetise their data assets as effectively as Google and Facebook. Investors, innovators and entrepreneurs frantically search for new technologies and business models that might mimic the Silicon Valley giants’ success. Policy makers in search of ‘growth’ wonder how to extend the monetisation of data to other sectors of the economy. Or else they worry that the concentration of monetising-power has gone too far. Radicals and campaigners decry the ways a tiny few are getting extremely rich from monetisation of data, with its fruits not being fairly shared. Their perspectives differ markedly: but they are all mesmerised by the same phenomenon of monetisation.

But actually, in the scheme of things, when it comes to the true global potential of personal data, Google and Facebook are a tiny sideshow. Advertising accounts for about 1.5% of GDP, and Google and Facebook are just one part of the advertising industry. And advertising is only one very limited use-case of personal data.

The biggest opportunities for personal data lie elsewhere entirely: in the other 98.5% of the economy that is not advertising; and in other use cases, most of which revolve around improving the efficiency with which services can be provided and enriching their content (via effective personalisation, for example). These opportunities, to deliver richer outcomes at lower cost, encompass the whole of public services (including health, education, the benefit and tax systems and so on), financial services, travel, consumer goods, retailing and so on.

Killing the golden goose

Seen like this, the current fashionable quest for ‘monetisation’ of personal data is a curse that urgently needs to be lifted. We need to focus on growing cherry orchards before we can do cherry picking. We need the infrastructure that reduces the costs of collecting and sharing data. We need the norms, rules and institutions that ensure data sharing is fair and trustworthy — creating a public good. And we need to unleash the potential of personal data across the whole of society and the economy, not just one tiny sector of marginal significance.

The monetisation mindset is all about people trying to grab for themselves the golden eggs personal data makes possible. But actually, it stems from a deep misunderstanding of what’s needed to unleash personal data’s full personal, social and economic potential and is toxic and counter-productive. It’s just killing the golden goose.

Vision for the future

Eleven years ago, when we established Mydex, we had a vision for the future of personal data. One that was about benefiting human beings rather than monetisation; about value creation not value extraction. About nurturing cherry orchards, not cherry picking. (A decade in, it will be another ten years at least before these orchards really starting maturing).

Believe you me, we suffered for not being fashionable. People wanted to know: “How are you are going to go viral?” (Answer: we won’t because we’re focused on institution and infrastructure building.) “What’s your killer app?” (Answer: we don’t have one because personal data is a general purpose utility that can make thousands of ‘killer apps’ happen.) And again and again, again, and again, and again “What’s your monetisation strategy?”. (We are not focused on monetisation, because of the above.)

Still, most people struggle to see how an entity can survive financially and commercially without this monetisation focus. The answer lies in cost reduction: in facilitating order-of-magnitude reductions in the costs of collecting and using personal data.

By ‘order-of magnitude’ we mean ten-fold reductions, a hundred-fold, perhaps even more. When you are helping to free up resources at this scale and intensity, you don’t have to obsess about ‘monetisation’. You can cover your costs, make a good enough profit and still make sure that most of the benefit goes to the people whose data it is.

Yet many people just can’t see how this could ever happen. That’s the focus of our next blog.