This Forbes article by Shomit Ghose discusses how ‘Big Data’ might become the only viable business model left for tech entrepreneurs as the commoditisation of software and hardware progresses. Ghose uses physics analogies to explain his point and the conclusions are difficult to argue with:
“So if maximum entropy has made hardware, software and networks as relevant and commoditized as steel or cement, what’s a budding entrepreneur to do? The answer is to focus on ventures in one of two areas: either in the monetization of data, or in providing the infrastructure to enable the monetization of data. Period. Start-ups lacking a value proposition squarely in one of these areas face an arduous and unsatisfying trek along Sand Hill Road. Successful entrepreneurs explicitly need a Zen understanding of how data drives business value in their target market. Successful products explicitly need to be able to help extract the value buried in ever-larger quantities of data. And successful pricing models explicitly need to be founded on delivering value from the semantics of data. Period.” [Read More]
Given the falling costs of DAM systems, the trend towards commodity offerings delivered on Cloud hosting platforms, one would have to conclude that the majority of DAM vendors are unlikely to recoup their product development costs (if considered across their entire life cycle). Our industry would certainly appear to be a microcosm of the wider situation that Ghose has observed, the questions is, how many know and have come to terms with it yet?
I think I would need to argue that Shomit’s infrastructure option is pretty much off the table (certainly for any poorly capitalised start-up). The monetization of data is an interesting angle with DAM. In regard to the image or video market, in view of the parlous financial state of many commercial stock media operations (with a couple of very significant exceptions) those producing media to be used within DAM systems appear to be being sucked into the same vortex as the tech sector.
The ability to track what users search for and how they catalogue assets, however, looks like it might be a far more fruitful area for anyone investing in Digital Asset Management. It remains to be seen whether system vendors have the scale and imagination to successfully exploit the data that their products are currently collecting on end users. I would expect more savvy buyers to perhaps also begin to recognise the value of what they were handing over also and demand some kind of slice of the rights to the user data their users were generating as a discount (potentially defraying any costs all the way down to nothing – or even being paid to use a DAM system). This raises some interesting questions about where the value in DAM solutions might be created in the future, since the end users are effectively being exploited as ‘big data workers’ in the same way that Google and Facebook use free apps and on-line tools to extract usage data and generate advertising inventory.