Pattern description

New value is created by collecting customer data and preparing it in beneficial ways for internal usage or interested third-parties. Revenues are generated by either selling this data directly to others or leveraging it for own purposes, i.e., to increase the effectiveness of advertising.

Inventive problems

Application examples

At Google, which sells its own personalised advertising service, data acquisition is even more closely related to income generation. Google succeeded in successfully using an ad-funded business model based on its AdWords service only two years after bringing the Google search engine to market. AdWords unobtrusively places customised written ads among search results. In 2004 Google extended the functionality of AdWords by introducing AdSense, an advertising service that can be integrated directly into customers’ websites. The following year Google acquired Urchin Software’s analysis service which enabled it to implement the Leverage Customer Data pattern more fully still. This service is a powerful website analysis tool now offered to site owners free of charge under the name Google Analytics. Google generates over 90 per cent of its revenues through advertising, acquiring its data through a myriad of free services such as search engines, personal calendars, email accounts, maps and rating systems.

The business models of online social networks rely wholly on the analysis of user data. Facebook and Twitter use such data to present personalised ads by third parties on social network pages efficiently. Both have so far been made available for free, so we might think of the data that users provide as payment for using these services. While Facebook continues to work on expanding on this business model, Twitter has decided to take a somewhat different path: companies that use Twitter can take advantage of certain premium services to have their tweets prioritised in followers’ feeds, which then serve as a type of ad. Additionally, Twitter has entered into partnership with third-party data analysis companies who are given unlimited access to Twitter databases that offer seemingly inexhaustible sources of information for market research, advertising and R&D.

References

The Business Model Navigator: 55 Models That Will Revolutionise Your Business