Why data is the gold rush of the 21st century

What Google has in common with Yoda, Bond and politicians

“Data is the new oil”.

“Data is the oil of the digital economy”.

We hear these mantras repeatedly, from IBM commercials to social networking businesses. But what do they really mean?

Every time you click online, every phone call you make, every tweet, comment, photo or “check-in”, results in your data being captured and analysed by corporations, whether you like it or not.

There was a time, not so long ago, where the search market was saturated with Yahoo, Alta Vista, Hotbot, Lycos, and others.

Google (and to a lesser extent, Yahoo) is the only company to emerge from the pack. Partly because of great technology and management, but mostly because the people behind Google have long understood the value of data.

Google was never ‘just a search engine’. It’s always been a data-centered company that offers free services (like search, mail, analytics, maps and *cough* Google wave) in exchange for the generation, capture and analysis of user data. And that’s where its strength and longevity has come from.

Google has long known what Bond villains, politicians and Yoda have always known: that data leads to knowledge; knowledge leads to power; power leads to money; money leads to fear and fear leads to the dark side.

At the present time, Google is at the ‘power leads to money’ phase, and we just have to hope that it continues to resist the temptations of joining the evil empire (NB Facebook et al. – be vigilant!).

We instinctively know that data can lead to money, but just why do people call data the new oil?

Well, for one, oil provides lubrication, and like oil, data greases the wheels of the digital economy. Without the grease that data provides, social marketers would not be able to apportion a dollar value to a ‘like’ on a brand’s Facebook page, and traditional marketers would not be able to effectively monetise a good, clean mailing list.

Data has inherent value, is effectively currency, but in its raw form that value is minimal.

Like crude oil, data has to be refined first, in order for it to have value.

Raw, crude oil is just slippery, smelly brown sludge, pumped out of the ground with limited few applications. Valuable, yes, but only for the potential uses that it has. It’s when you begin to refine it (does anyone remember the Oil Refinery Cracker diagrams in GCSE chemistry?) that oil turns into bitumen, kerosene, plastic and gasoline.

Likewise, it’s only when you start to refine data, that you produce metrics, business intelligence, analytics, and statistics. And that’s when data become more than just grease. That’s when it becomes a currency to be traded.

But what of the future of digital data?

Respected Media Futurist, Gerd Leonhard, asks (and answers) the question: “If data is the new oil, how do we avoid wars and global conflicts fought over it?” His presentations and blogs give an excellent insight into how data transparency will benefit mankind and stop that from happening.

The central principle is sound. Wars have been fought over ‘Black Gold’. Will similar wars be fought over the ‘Binary Gold’ that is digital data, and if so, how do we prepare and protect ourselves?

I still feel that we’re maybe not quite there yet. There’s enough data to go round, and we’re pumping it out of the ground at a startling rate. We’re generating more and more of it every millisecond with every click or status update.

So right now we’re at the gold rush phase, and it’s the companies with the virtual picks and pans that are prospecting now that will be the winners in years to come.

Those than can collect (and most importantly ‘refine’) data – participants in the so-called ‘big data’ sector – are the ones that will have the ideal weapons to fight the digital and commercial wars over binary gold in the future.

And we hope that when they do, that they resist joining the dark side and rather use their power for the collective good, to advance transparency, knowledge, technology and understanding.

Gregory Kris will be chairing the Data is Sexy seminar at the Digital Music Conference this Wednesday. 

Gregory Kris is an original dot-com CEO, selling his first digital business, a social network, in 2000. Since then he has run and sold two start-ups, advised on numerous others, and invested in a couple more, with varying results. A firm believer that ‘data is the oil of the digital economy’, Greg is currently CEO of Decibel, the music metadata specialists, and has been called ‘Europe’s first Digital Data Baron’. You can follow him on twitter at @gregkris or email him greg.kris@decibel.net