The Contradiction of Free Data and Business Models

I’ve been noticing two diverging themes lately when it comes to geo-stuff on the Web. First was all the buzz around Google ditching TeleAtlas and using their own data plus open data to support their base map. Second is the emerging and opposing of geo-related start ups looking at data marts or data sales as a potential monetization path.

On the surface these seem almost contradictory. Large enterprises moving towards using free data – meaning free from cost and free from licensing. At the same time governments are increasingly investing resources in supplying more free data to the public. Then there is the challenge with licensing and derivative works around data sold for a fee. Data sales have always been a big component of the GIS market, and the pitfalls of relying exclusively on open data have been voraciously documented in the wake of Google’s announcement. Despite the hiccups, Wall Street is devaluing companies that rely on geodata sales.

It is arguable that the marginal value of data is trending towards zero. Typically there is a direct correlation between the price of data and labor required to create the data. What we’ve seen over time is technology decreasing the cost of labor and driving down the marginal value of data as a result. Road data is the obvious example our community cites most often, but I believe we’ll see the same thing happen across the board. Take another big ticket geodata winner of the past – demographics. As locationally aware mobile devices become pervasive, and our collective aversion to privacy increases, our concept of geodemographics will change dramatically. As will the cost structure. The labor to suck data of a growing live sensor net will be a dramatic shift from the army of surveyors and call centers traditionally used to collect data.

The location API for Twitter is a great example of the coming shift. What will it cost to collect real time demographic sentiment across the Twitterverse….zero. Obviously everything can’t be free, and at some point economic rents are required. On the off chance I’m right that data will continue to be squeezed. Where is there money to be made? Right now I’d argue ads and apps. Who is making tons of money right now? Google and Apple. When it comes to “bytes” what do they sell – ads and apps. Google is more focused on ads for monetization and Apple more focused on apps, but Apple’s app ecosystem relies in part on ads and Google’s ad network relies in part on apps.

Otherwise you are talking about enterprise sales which I’d argue are lagging but headed in the same direction (minus ads). Both Google and Apple are expanding towards enterprises with the same recipe for success. For those of us trying to make money off geo-stuff the value is not in the data, but the questions that you answer with it. If you have an app that answers a meaningful question then someone is likely to pay for it – the data is just along for the ride.