Valuation and Data Monetization

Over the last few weeks I have been documenting some of the work EMC has been doing with Dr. Jim Short of the San Diego Supercomputer Center (our Architecting for Value research). The research has allowed us to explore the topic of data valuation processes within the enterprise.

Previously I highlighted five different use cases where we are looking at how valuation occurs. These use cases include M&A, asset valuation, data monetization, the sale of data assets, and data insurance.

I have also discussed an example of valuation that is occurring as part of bankruptcy proceedings. The Caesar's Palace bankruptcy was chosen as a research use case partly because the data assets are being valued more highly than the real estate assets. One of the key insights from this bankruptcy is the lack of standardized data valuation processes.

In this post I'd like to take a look at another valuation area: data monetization. Bill Schmarzo argues quite persuasively that a more accurate title for the role of Chief Data Officer (CDO) would be Chief Data Monetization Officer (CDMO). One of the more important aspects of this role is the responsibility to leverage data assets as a means of generating additional revenue sources.

Dr. Short has been researching data monetization use cases and one of the more interesting examples is the case of 23andMe and Genentech. Consider the following statement taken from a Forbes article:

"According to sources close to the deal, 23andMe is receiving an upfront payment from Genentech of $10 million, with further milestones of as much as $50 million. The deal is the first of ten 23andMe says it has signed with large pharmaceutical and biotech companies."

The data assets owned by 23andMe were generated by selling DNA kits to customers for roughly $99 per kit. As of early 2015 the Forbes article asserted that 800,000 such kits had been sold, resulting in roughly 79.2 million dollars in revenue. Each customer has the ability to grant 23andMe the right to use the data for research purposes. By granting Genentech access to these data sets, 23andMe has opened the door for a potential 60 million dollars of additional revenue (without selling another DNA kit).

This use case raises several question about valuation:

• Are there economic algorithms which can predict the potential future value of such data?
• Is 23AndMe receiving fair market value for the data?
• How did they arrive at the $10 million down payment and potential $60 maximum?
• Does 23andMe have a sales department that markets their data?

In other words I am wondering exactly what 23andMe's valuation processes are. Understanding the evolution of these new business processes is a primary goal of the research, and indeed a survey has been formed to gather this data from a variety of industry sources.

Feel free to contact myself or Dr. Short to participate in the research or get access to the results.

Steve

http://stevetodd.typepad.com

Twitter: @SteveTodd

EMC Fellow