The Rise of Data Marketplaces (Smart Cities & Other Use Cases)
Data Marketplaces have the potential to fundamentally shift business strategies in the coming years by democratising access to external data sources, enabling data monetisation at scale, creating significant innovation opportunities, and providing a frictionless experience for participants.
An Emerging Sector with Super Growth
The global pandemic has accelerated our shift towards the fourth industrial revolution, where data and information are increasingly valuable assets for both businesses and society. The amount of data generated daily has grown exponentially over the last two years and data marketplaces are well positioned to capitalise on this trend[1]. As our digital economy advances across Cloud computing, IOT, Blockchain, AI/ML and 5G, there is significant potential for companies to leverage the unprecedented amount of available data to build new digital services and capabilities[2].
Despite this incentive, many businesses struggle to tap into valuable data sources and devise effective long-term data strategies. Significant challenges exist across legal regulations, governance and sensitivity of data sources which have hamstrung the widespread adoption of data marketplaces. Nevertheless, the fact that marketplaces can scale rapidly by removing the need for their own inventory is a crucial component which positions them to capitalise on emerging trends. It is estimated that by 2030 over a million organisations worldwide will monetise their data assets, unlocking more than $3.6 trillion in value, and marketplace platforms will play a significant role in enabling this[3].
Classifications of Data Marketplaces
Data marketplaces — which provide an online transactional storefront to facilitate the buying and selling of data; have enormous potential to create new revenue streams through data monetisation. These marketplaces exist in different forms, but three clear categorisations have emerged in this space — these are: (1) Personal data marketplaces, (2) B2B data marketplaces and (3) IOT data marketplaces. Each of these come with their own challenges but provide opportunities for participants to monetise their data assets, gain access to new data streams and build cutting-edge capabilities.
Challenges Businesses are Grappling With
Although data has evolved beyond its traditional role of driving executive decision making to becoming the cornerstone of business operations, many businesses struggle to build disruptive capabilities simply by harnessing the data they generate internally[5]. Resultantly, demand for external data sources has increased, but challenges are present regarding the costs, time and risks associated with sourcing and operationalising external data. Buyers struggle to recognise the fair market price of data, and major cost implications exist in generating, processing, storing, and distributing high quality data[6]. Conversely, sellers are challenged with the lack of trust which comes with disclosing sensitive data and how this might benefit their competitors or other actors who obtain access. Many businesses also struggle with contextualising external data sources, and expertise is often required to navigate the legal and governance challenges which come with transaction and monetisation.
The unavoidable return on investment question!
Enterprises operating outside of the IT sector are increasingly seeking a return on their investment in data capture through leveraging the Internet of Things (IoT) and developing proprietary data assets for sale. However, they face difficulties with marketing and selling these offerings to entities which are not part of their traditional customer-base, and often require third-party support to operationalise these capabilities[7]. Collaborative IoT ecosystems which bring together enterprises, users, and developers have failed to take hold due to high entry barriers and low potential gains for each individual stakeholder. Although these ecosystems exist, they face significant impediments around interoperability as many are focused on sectoral verticals and are designed as closed systems built on heterogenous architectural standards[8].
The opportunity with marketplace business models
Data Marketplace platforms can alleviate these barriers by connecting participants and simplifying end-to-end transactions. Platforms act as neutral intermediaries which generate more efficient interactions through standardising interfaces and handling much of the market transactions[9]. By aggregating and democratising access to data, marketplaces facilitate data monetisation with greater ease and unlock a number of new use-cases for a broader range of organisations.
IoT Data Marketplaces are tackling issues around platform interoperability by leveraging APIs to enable cross-platform and cross sectoral services[10]. In doing so, multiple IoT data streams can be combined to generate huge innovation potential across several emerging spaces.
Smart Cities Case Study
IOTA’s data marketplace platform connects citizens, city leadership and corporations to break down data silos and increase transparency around key initiatives which enhance public services, sustainability, employment levels and fund the city’s growth. This has been piloted in Trondheim Norway where an energy positive building produces surplus energy to power electric car charging stations, busses, and neighbouring buildings. In doing so, data is exchanged in real-time between the corporation which owns the building, car manufacturers, public bus service providers and the Trondheim municipality which provides more efficient energy sources and transport options to its citizens. Additionally IOTA have integrated Blockchain and DLT into their architecture using smart contracts to preserve privacy, create safe payments and enforce trust. This provides a more resilient and secure experience for participants.
The role of data marketplaces in business innovation
Data Marketplaces provide a range of opportunities to enhance innovation and shape business strategies for organisations. According to IDC, greater access to external data sources will be a crucial component of future business intelligence, and the increased transparency and access enabled by data marketplaces is expected to significantly accelerate transactions on these platforms over the next two years[1]. Although data monetisation is not a new phenomenon, the characteristics enabled by marketplaces platforms are significantly streamlining this process. Therefore, it is crucial for organisations to consider how greater accessibility and commoditisation of data can inform their next moves.
Sources:
[1] https://www.reportlinker.com/p06097847/Trend-Opportunity-Profiles-Data-Marketplaces.html?utm_source=GNW
[2] https://www.ceps.eu/wp-content/uploads/2019/08/208-216-Forum-Spiekermann.pdf
[3] https://www.accenture.com/us-en/insights/high-tech/dawn-of-data-marketplace
[4]https://towardsdatascience.com/data-marketplaces-the-holy-grail-of-our-information-age-403ef569fffb
[5] https://venturebeat.com/2020/12/23/data-marketplaces-will-open-new-horizons-for-your-company/
[6] M. Spiekermann, S. Wenzel, B. Otto: A conceptual model of benchmarking data and its implications for data mapping in the data economy, in: P. Drews, B. Funk, P. Niemeyer, L. Xie (eds.), Multikonferenz Wirtschaftsinformatik (MKWI), 2018, pp. 314–325; D. Moody, P. Walsh: Measuring the Value of Information: An Asset Valuation Approach, in: J. Pries-Heje, C. Ciborra, K. Kautz, J. Valor, E. Christiansen, D. Avison et al. (eds.), Proceedings of the 7th European Conference on Information Systems, 1999, pp. 496–512.
[7] https://www.idc.com/getdoc.jsp?containerId=prUS47391421
[8] A. Bröring et al. (2017) Enabling IoT Ecosystems through Platform Interoperability
[9]https://www.intereconomics.eu/contents/year/2019/number/4/article/data-marketplaces-trends-and-monetisation-of-data-goods.html
[10] https://iot-epi.eu/project/big-iot/
[11] https://www.idc.com/getdoc.jsp?containerId=prUS47391421
[12] https://sonra.io/data-marketplace/the-data-marketplace-a-missing-piece-in-modern-data-architecture/
