How much is big data worth?

It's not news that companies are now tracking customer purchases and behaviors. But, how much is all this data worth? Information is not a physical asset and there are no standards for measuring its value.

According to Leonard Nakamura of the Federal Reserve Bank of Philadelphia, estimates that corporate holdings of data and other intangibles are worth around $8 trillion. Better accounting information about data would help third parties understand how companies are investing in growth. This issue isn't only affecting the tech industry. Supermarket chain, Kroger records what its customers buy at its more than 2,600 store locations. It also tracks the purchase history of its 55 million loyalty-card holders. It sifts through this information to identify trends and then sells their findings to vendors that stock their shelves. Consumer products companies are willing to pay for that information because it helps them manage their supply chain and tailor their products to shifting consumer demands and tastes.

It is estimated that Kroger makes around $100 million a year from data sales but the company remains quiet on the matter. Without standard accounting principals, this asset that is clearly profitable to retailers may be represented on the balance sheets. Another issue is how to account for the time spent by employees in information gathering and analysis. Should it be considered an expense or capital investment.

Companies such as Google, Facebook and eBay are especially hard to value by investors since they make most of their revenue from data collection. Others argue that knowing the true value of data is not necessary because the company's stock price reflects the market's appraisal of its assets. “Data is worthless if you don’t know how to use it to make money,” said Laura Martin, an analyst with Needham & Co. Information. The data loses value as customers' tastes change, which can happen at any given moment. Thus, information is perishable and must be replenished continuously in order for it to be of any value, especially in the consumer products and retail space.

Source: http://online.wsj.com/articles/whats-all-that-data-worth-1413157156