Today I begin the first of a series of opinions discussing the impact, challenges and opportunities as a result of the so-called disruption caused by the advent of the Fourth Industrial Revolution, with a specific focus on the role of Big Data.
If I were to ask people how much they pay for online services such as Facebook, Instagram, Twitter, and Google, I would likely get looks of bewilderment and confusion. After all, everyone knows these online services are free, right?
What if I told you that access to and usage of these services have a value, but instead of a price of admission, it is a fee most don’t realize they are paying, or even if they are aware of it, couldn’t be bothered about the cost.
Facebook’s 2016 advertising revenue stood at $8.629 billion. Taken in context with the 1.230 billion users of the platform, that figure comes down to roughly $7.02 of advertising revenue per user. Google boasts of a much grander figure, with 2016 advertising revenue of $79.4 billion, which converts to a revenue of about $79.40 per account holder. Now consider that the total global revenue of the entire Google empire, inclusive of all services and products, reached $89.5 billion for the same year, then advertising revenue accounted for a massive 88.72 percent of that.
Clearly, these multi-billion-dollar technology giants are heavily reliant on online advertising for their revenue stream. The open secret is that advertising is tailored to the target market, based on the various user actions online, creating an online profile that is useful for marketing. Each and every share and like, post, comment, and view all add to the database that makes up the online profile of each person. Ads are then directed to the user based on these preferences. This is precisely why each user has different ads that show up on their online profiles.
That explains the emergence of Big Data, which grew along with the rise of the digital economy. Data is the new oil. It has risen to become the most valuable commodity, and the companies that access the data, such as Apple, Alphabet (Google’s parent company), Microsoft, Facebook, and Amazon.com, comprise half of the top tier Fortune 500 companies. In fact, they are among the top five most valuable companies on the list, and the combined market value of these tech giants amounts to more than half of the value of all the companies in the top 10. This means that the tech giants have emerged to be far more valuable then long-established brands such as Exxon Mobil, Berkshire Hathaway, Johnson& Johnson, GE, and Wells Fargo.
Data serves far more purposes than solely advertising. Apple notes which apps you download so it can offer other similar apps. Amazon identifies your prior purchases and recommends other things you may want to purchase. Waze uses your travels to help update its maps. Tesla uses the data generated by their self-driving cars to better their vehicles.
Clearly, the adage that “there is no such thing as a free lunch” still holds true today. Honestly, that is perfectly fine. We effectively pay for access to these online services through the data we generate and provide. Far too many people, myself included, are more than willing to provide location data to Waze and Google Maps to help us in our daily commutes. Facebook, Twitter, and Instagram have given us the platform to air our thoughts and show to others the events of the day. Messenger, Viber, WhatsApp, WeChat, and Line provide ease of communication, anytime and across borders.
For so long as more people get online and utilize these services, through smartphones, tablets, and other devices such as fitness bands, more data will be created. The more reliant we are, the more data we create per person. It is the resource that, unlike oil, gold, and other commodities, will probably never be exhausted.
However, in this increasingly invasive digital age, we all should be more vigilant to protect our data, and be cautious in choosing which services we are willing to “pay for” with our data.
Next month, I will be discussing the rights we are giving up in exchange for access to these services, and how to be more careful with our clearly valuable data.
The author, Atty. Ira Paulo Pozon, is the founder, CEO, and counselor for Compliance, Trade & Investment, and Government Relations & Public Policy at Caucus, Inc., a multi-industry, multi-disciplinary consultancy firm. He graduated with an MBA from De La Salle University, Juris Doctor from the Far Eastern University, and LLM in International Commercial Law from the University of Nottingham, United Kingdom. He was a Chevening-HSBC UK Government scholar, a Confucius Institute scholar, and an alumnus of the US State Department’s International Visitor Leadership Program. He teaches at the College of Law of the Pamantasan ng Lungsod ng Maynila and at Miriam College. The author may be emailed at firstname.lastname@example.org