Sunil Soares, CEO YDC
Alex Scroggins, CTO YDC
The Data Monetization Index (DMI) is a key metric that measures the value of a company’s data to its Enterprise Value or Market Capitalization. The YDC team has produced DMI scores for several large, publicly-traded companies.
The DMI can be increased through the creation of data products. A data product enables some goal (such as revenue growth, cost reduction, free cash flow improvement, or risk mitigation) through the use of data. The user of a data product could be internal to the company (for example, the marketing department) or external (such as customers, partners, or regulators).
Data products are produced from data sets that the company collects through its normal business operations. Just like raw materials are used to produce finished goods in manufacturing, one or more data sets are used to create a data product.
In March 2021, American Airlines announced an intent to raise $7.5 billion in senior secured financing collateralized in part by the AAdvantage Loyalty Program (see Figure 1). This long-term debt data product was partly based on multiple datasets including the demographics, mileage activity and flight details for American’s loyalty customers subject to privacy restrictions. The company’s future bondholders were the target customer for the data product.
Figure 1: American Airlines’ Long-Term Debt Data Product
In October 2020, Citibank paid a fine of $400 million to the United States Office of the Comptroller of the Currency (OCC) for deficiencies in its data governance, risk management and internal controls (see Figure 2). As part of its remediation processes, Citibank likely introduced a robust data governance program based on report certification and Key Data Elements (KDEs). The bank’s OCC Compliance data product was partly based on the report and KDE data sets with the OCC as the target customer.
Figure 2: Citibank’s OCC Compliance Data Product
Let’s conclude with an example from the Interactive Home Entertainment industry. Roblox generated $1.9 Billion in bookings during January 2021 to September 2021 from its in-game currency Robux. This microtransactions data product was based on user interaction data with the company’s gamers as the target customer (see Figure 3).
Figure 3: Roblox’s Microtransactions Data Product
A robust approach to data products and data sets with a clear understanding of target customers will set companies on a clear path to data monetization.