Data Portability: Is the Social Network Data You’re Hoarding Treasure or Trash?

This is a guest article by Andrew Chen – see more at Futuristic Play by Andrew Chen.

Data portability: What’s the value of your social network data?
This blog post will be focused on the business-perspective of how a company operating a social network might think about their data, particularly in regards to advertising monetization.

There’s been a lot of discussion on the data portability issue in one form or the other. The consumer perspective on the data portability issue on the consumer side has been well-covered, and is well represented by Robert Scoble, Marc Canter, Gillmor Gang, and others. This is a big topic, especially when you’ve added as many friends on Facebook as our Doonsberry friends have in the above comic.

Business reasons to resist portability

When a company has aggregated a critical mass of audience and data, it’s clear that data is worth something – but unclear how much. In particular, a social network might be resistant to data portability for a number of reasons, including:

  • If the data can be monetized through advertising, then a company might want to have proprietary access to that data
  • If a competitor can easily import user data, it makes it easier to switch services
  • If a user can too-easily share their data with external services, it may create privacy and security issues
  • … and others

There are many other reasons why businesses are reluctant to jump full bore into releasing control of the data – some great for consumers, some neutral, and some completely unaligned with their users’ interests. It’s my opinion that, like the way Windows has evolved, you want to provide access to data but you need to make it very clear what users are getting themselves into.

The reason spyware has turned into such a huge industry was that for many years, it was far too easy to install any executable off the internet – the Operating System gave poor warnings to users. There are things you want to do to make sure you’re not destroying an entire ecosystem, while still supporting the goals of your users.

My particular interest in this question mostly has to do with the value of the data, particularly from an advertising standpoint – the first bullet above.

The monetization of user data

The question is, if companies are busy hoarding all this user data – what is it really worth? How do you evaluate its value? And how does it fit into the context of the overall advertising market?

To outline the answers to this question, I’ll cover a couple specific topics:

  • Ad network business models
  • Interest versus intent
  • Data to traffic overlap

Then I’ll conclude with a short discussion on the future of social network data.

Ad network business models
The market for user data is very early. Only in the last few years have companies emerged like Revenue Science, Tacoda, Blue Lithium, and other companies you see on this list. Note, of course, that I was previously employed by Revenue Science and worked on their direct response ad network (in addition to other roles).

But to step back: For newbies to the advertising world, it’s important to note that there are many many ad networks out there besides Google AdSense. For example, Blue Lithium, Valueclick, ContextWeb, Advertising.com, etc are all ad networks that fundamentally do the same thing:

Buy ad space at a lower price, then resell it for a higher price

Quite simply, it’s arbitrage. They sign up publishers, get them to stick ad code on their pages, and then fill the space with banner ads, punch-the-monkey flash games, etc. The bigger the delta between what they buy it for and what they sell it for, the better their profit margins.