The New Business of Data | Frontier Economy

Information wants to be free, but that doesn’t preclude building business models around data. An interview with Chris Hathaway, founder and CEO of AggData, and Joseph Kelly, one of the founders of Infochimps, two startups attempting to break new ground in the data market.

In an era very much characterized for an explosion of freely available data on the Internet, what was your strategic analysis for basing a business model on the sale of data?

(AggData’s Chris) I feel it is a bit of a misnomer to describe our business as “selling data”, because it implies that we initially own the data and there is an ownership transfer when we sell to a customer. The data we collect is already freely available to anyone who wants it; we simply provide it in a much more portable and usable format. What we are really selling is a service. It is “Step 1″ in any data analysis or business intelligence process – the initial gathering of data. We feel our methods for extracting and collecting data are extremely efficient and accurate, and that clients are willing to invest in these proven methods and immediate results rather than attempting to source their own.

(Infochimps’s Joseph) While data may be freely available on the web, much data is still hard to find. A search for historical conversion rates between the dollar and pound for that past 100 years won’t result in anything satisfactory for the first 100 results. Infochimps.org was started as a way to change that, a single repository for all the data on the web. The marketplace features for Infochimps.org are what we use to encourage users to upload data who might otherwise not have incentive. When there is a place that users can expect to find buyers for their data, a lot of data will come out that has been sitting on hard drives for too long.

Chris, your business model is based on gathering data from other sources. What are the technical difficulties involved in that process? How is the marketing of data sets different from that of other products?

(AggData’s Chris) We feel our principle advantage over competitors is our ability to collect data from primary sources. For example, when we sell a complete list of Walmart locations, we collect that data from walmart.com, because we feel it is in the company’s own best interest to provide customers with the most complete and accurate data on their own website. This method, however, obviously has technical challenges, considering the seemingly infinite technologies available for companies to build these sites, and we have to learn to work with them all. Aside from one or two impenetrable brick walls, we have found that we are always able to work with these sites to collect the data without overloading them with traffic or undermining their intellectual property.

The marketing of our datasets is very similar to the marketing of any other product, in that we find a need in the industry and offer our product as a solution to fill that need. Fortunately, however, we have some distinct advantages. The products we sell have a very small competitor space, yet there is a very specific demand for this type of service. We have very little reason to manufacture a need; customers who find and purchase our data have few reasonable alternatives. And while the market is smaller than average, a greater demand within that market helps our products sell themselves.

Joseph, your business model is based on acting as a platform for the sale and purchase of other people’s data sets. What groups do you see as the main drivers behind the commercial offer and supply of data?

(Infochimps’s Joseph) Our first suppliers, Zogby and AggData included, come from the market research industry, a $12B yearly industry. This fits well with the profile of many of the users who come to download free census data from the site. On the horizon, we hope to see more and more internet businesses open up and share or sell their data. Data dumps should be complimentary to APIs, just like Freebase does.

What current technological and business trends do you see influencing your market the most during the next few years? What technological changes (likely or not) would radically change the strategic landscape?

(Infochimps’s Joseph) Infochimps is part of a group of technologies that are bringing massive streams of data to everyone in the world. Cloud computing lets anyone rent powerful computers for pennies an hour, and tools like Hadoop let anyone work with huge datasets. The digital age insures there is a deluge of data out there, and Infochimps aims to be the place for the growing demand to find that data.

(AggData’s Chris) Here at AggData we are staunch supporters of any new data initiatives that encourage the open exchange of standardized, portable, quality datasets. We have seen a few of the companies whose data we sell start to offer their data to the community, and if this becomes the norm, our current business model becomes less viable. But, as I previously mentioned, the service we provide is merely “Step 1″ in the business intelligence process, and likewise, our company is merely at “Step 1″ in our offerings. Our future goals include using the data we collect to provide more meaningful information and intelligence. While still somewhat unlikely in most protectionist corporate climates, the opening up of data would only catalyze our efforts to enhance the extractable intelligence from these raw facts.

Note: If you want to test their platform, Infochimps has provided an invite code for Frontier Economy readers. You can use the ‘datafrontier’ invite code at their account signup page.