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The Economics of Big Data

 8 min read / 

The demand for Big Data is growing with companies realising the predictive potential this incredible technology holds and which can make them more competitive as they identify patterns often impossible for the human brain to conceive.

Despite the surge in positive sentiments regarding Big Data, there are some concerns regarding how much storage space it requires and the current capacity to meet the demand. There are also fears that Big Data, combined with psychological profiling, could be used to influence voters and directly affect how they cast their ballots.

Data Overload

Everything can be data – actions, behaviours, sentiments. It has always existed, but the technology of today allows this data to be stored in massive quantities for later analysis. The data sets are usually so large that they will need extraordinarily complex processing software to make sense of them.

Companies, governments and institutions are waking up to the use of Big Data to try, for example, to prevent diseases or help fight crime. But most of all, Big Data is being used to detect new business trends and make companies more competitive.

Walmart uses Big Data to try and improve its profits by looking at customer transactions. It crosses the items bought with the time and number of purchases. This data gives the company clear evidence of what needs to change and what is worth keeping in the business strategies.

Good For Business

With the growth of the digital world, the amount of digital information keeps increasing at an exponential rate. Google is betting heavily on the Big Data it collects from its users to provide a better service in the future. Its search engine collects and translates the number of clicks on any website to determine how much that site is worth.

There have also been a few companies trying to use Big Data to match people looking for a romantic partner. Websites like match.com and OkCupid use data generated by the users’ choice of preference to pair them with possible compatible matches.

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Recently, Coca-Cola made headlines because it released two new flavours. The novelty surged after the customers chose their preferred non-existent flavours in a few selected “Freestyle” machines the company installed for testing. The devices collected the data from what the users preferred and started developing the two most wanted flavours.

But the potential of Big Data can also thread into political waters. An app called Ovia, specialised in helping women conceive by tracking their menstrual cycles, mapped which American women were more conservative depending on where they lived and whether they were trying to get pregnant or not.

Going Mainstream

Big Data is becoming a valuable commodity for companies. It can play a valuable role in establishing new development strategies or even serve as the basis for entire business models.

The analytical results of Big Data can affect business decisions and, in some cases, provide the certainty companies need in order to tackle new investments. According to a report by Forbes magazine, at least 60% of the companies that used Big Data in at least half of their marketing campaigns admitted that they exceeded their initial goals.

60% of companies who used Big Data admitted it exceeded expectations

It is influencing more and more of the business processes within companies as it makes them more successful at identifying the specific areas which they need to improve.

Challenges Ahead

Big Data sounds promising to companies, but as the technology grows, it pressures the IT aspects that make it secure. It swallows up the storage space currently available to the limit, and it also makes it harder to guarantee the safety of all that data while maintaining the privacy that some of the data may require.

In fact, market intelligence firm IDC estimates that the so-called unstructured data that comes from Twitter and Facebook posts and photos is going to grow from 9.3 zettabytes in 2015 to 44.1 zettabytes in 2020. The upside is that according to an estimation by Forrester, the total global Big Data management solutions market will grow an average of 12.8% a year from 2016 to 2021, making it possible to deal with that enormous growth.

But some of the existential challenges of Big Data go beyond technological drawbacks and enter the fields of ethics and morality. There have been examples of the use of Big Data returning some frightening results.

There was a police website that mapped police interventions in a city in the US and inadvertently ended up revealing that the only day of the week where officers wouldn’t “sweep” a street known for prostitution was the Wednesday. This strategy was a secret within the police department and was supposed to be kept secret, a secret that Big Data unveiled.

Data-Driven Politics

When a majority of the British electorate voted in favour of the United Kingdom exiting the European Union in the Brexit referendum on June 23, most of the media seemed perplexed. Similarly, the election of Donald Trump as President of the United States was baffling to many who had followed the polls religiously. One of the most widely-spread theories is that there is a big part of the population that is not reflected by social media and that lives outside of the major cities where under media scrutiny.

But there might be other explanations, one of which is the usage of big data to influence political margins. It is possible to combine psychological profiling of the electorate with the data they produce and create advertising content that explores the unconscious biases of niche voters on an individual level.

This strategy may be compared to the commercial subliminal messages that movie-goers may be exposed to during films, where they are often influenced into buying the products they see on the adverts. In the 1970s, these kinds of messages were banned.

Trump won the Republican primaries, using a smaller budget than Hillary Clinton, the Democratic Party candidate. Trump’s campaign resolved to design a unique digital strategy which took the masses by surprise.  Trump’s team hired British data company Cambridge Analytica who worked alongside Donald Trump for the whole campaign and helped him figure out how to win the Presidency using Big Data.

5000 Cambridge Analytica’s data points on American voters

Cambridge Analytica has, according to its CEO Alexander Nix, between 4000 and 5000 data points (or pieces of information) on every adult citizen in the United States. This includes age, gender, ethnicity, what press they read, what TV shows they watch, what food they eat and what cars they drive. It comes as no surprise that Trump happily bought their services.

1.5bn is how many times Trump’s ads were viewed

So, by assuming that people who buy the same things have similar personalities, this Big Data company dug deep into the electorate and determined where it would be more cost-effective to advertise and which portion of the electorate Trump had the bigger chances to win. This way, the ads the campaign produced were tailored to particular kinds of voters and their preferences.

It resulted in 4000 different online ads that ended up being viewed 1.5 billion times. While Hillary Clinton chose to spend more than $133m of campaign money on ads, Trump spent none of his budget on advertisement until September 2016 when he began to discretely post his ads on Twitter.

Future Opportunities

A 2015 study conducted by IDG revealed that 39% of the respondents had no plans of introducing Big Data analysis in their companies in the following year. However, the survey shows that 36% of the companies have an increasing will to dedicate a bigger percentage of their IT budget to data-driven projects.

36% of businesses want to increase their data-driven projects

But scepticism is also on the rise when it comes to the implementation of Big Data. Jumping into Big Data might be a natural step for tech titans like Facebook or Amazon, but smaller firms might not necessarily need this kind of technology to help their business, especially considering the costs.

Irrespective of the success of Big Data in mainstream workplaces, it is already everywhere in everything humans do. With GPS technology, locations are now data. Even what people ‘like’ on Facebook is now data, quantified and prone to serious analysis.

This data collection and analysis will likely continue to be carried out and developed in the future. It may serve as a commodity in business, a source of information and a tool to fix problems.

Its development will likely be a reflection of society and how humans think, react and interact with each other. It is a fascinating technology, but companies and people shouldn’t let it blind them without taking into account the problems it has and the answers it doesn’t have.

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Companies

Whatsapp Launches New Venture Aimed at Businesses

 1 min read / 

whatsapp business

Whatsapp has launched a new app targeted at businesses, called the Whatsapp Business App, which they claim will enable companies to “communicate more efficiently” with present and potential customers.

This forms part of Whatsapp’s wider strategy to branch out into the corporate world. It plans to use the app to generate new revenue by charging businesses for using the extra communication tools that will enable them to better connect with their customers.

Although the app is set for worldwide release, at present it will only be available in Indonesia, Italy, Mexico, the UK and US. It includes a feature which indicates a business is authentic with a green tick badge next to their name.

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Companies

Amex: Troubled Credit Card Company Reports $1.2bn Net Loss

 2 min read / 

Amex annual report

On Thursday, American Express, or Amex, reported a net loss of $1,197m in the fourth quarter, the first net loss the company has experienced for 26 years.

Although the company stated that revenue from interest expenses was up 10% to $8.8bn, Amex said recent reforms to the US tax code meant the company incurred extra costs, including a repatriation cost on its foreign assets as well as a devaluation of its deferred tax assets. It estimates total costs amounted to $2.6m.

For the full year, net income was $2.7bn compared with $5.4bn the company earned in 2017. However, even with the estimated $2.6m the company claims it incurred from the recent tax charge, net earnings were still $5.3bn, $100m lower compared to last year.

In New York, American Express shares (AXP) took a near 1% tumble at the beginning of trade with shares finishing the day on $99.90.  JPMorgan Chase and Goldman Sachs anticipate greater earnings for 2018.

“Overall, we believe the Tax Act will be a positive development for both the U.S. economy and American Express” said CEO and chairman Kenneth Chenault. Chenault also said he will be leaving Amex in “very strong hands” when his successor, Steve Squeri takes over next month.

American Express has suffered from an ever-reducing share in the credit card market and ended its 14-year relationship with American warehouse chain Costco who in 2016 made an agreement with the market leader, Visa.

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Companies

Tencent Extends Facebook Lead

Tencent Facebook

Tencent has shot past Facebook to become the world’s most valuable social network.

Editor’s Remarks: Although Tencent briefly overtook Facebook in terms of market cap in November, the recent selloff of Facebook shares prompted the Chinese tech titan to regain the lead. Facebook investors responded negatively to news that Mark Zuckerberg’s plans to highlight family and friend-based content on the newsfeed would reduce the amount of time people spent on the site. Shares in Facebook have fallen 5% since that announcement, enabling Tencent to gain a $19bn lead over the US company. Tencent’s growth has been spurred on by its diversification away from its flagship messaging app, WeChat, and into video games.

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