A new class of Internet start-ups is trying to turn data into money | Hacker News Reader

A new class of Internet start-ups is trying to turn data into money

economist.com

66 pointsithayer14 comments

Using data as a competitive advantage isn't a new thing, Tesco and Amazon largely built their success on their operational data analysis and eBay didn't fall to fraud like their competitors because they had better fraud detection algorithms.

However I think it's becoming much more common, most non-competitive industries often have ignored data analysis as a method for competing, hence it creates an opportunity for startups to disrupt stagnant industries.

Agreed, it's just that building stuff is cheaper and easier now, and more industries/SMB are going to digital book-keeping, so there is now more data to be gathered by more people.

It's interesting to note that Tesco's CEO was formerly their CTO.

Not TFA, but....there are a few companies like this one (http://www.reveredata.com/about.html) who do tremendous work gathering and organizing data into something useful for consumer customers and sell off the labors of their work for a nice bit of money...a very interesting model to follow.

Every now and then you see a company do something and you go "damn that's smart". Trada was the last one for me. I had the same reaction with Klarna. That type of lending basically makes you a micro credit-card company... "issuing" you credit on a per-purchase basis.

Smart.

The problem with business models like readyforzero's 'sell our users information for money' is that it relies on users not realising that this will happen.

Users let sites like readyforzero access their personal information; if they, say, put on their front page 'It's free because we sell information on your credit card transactions so businesses can decide not to offer you credit if they look too bad', most users probably wouldn't sign up - they want to make their credit rating better, not risk making it worse.

Relying on consumers not knowing about business practices is not a sustainable business plan for a model that needs high numbers of users to be profitable.

That's a serious concern, and I'd like to help address it (I am the director of UX at ReadyForZero).

A core tenet of our business is that we always act in the interest of the user. So far, our monetization works as follows:

- Someone is on our site getting out of debt, and we have a good picture of where they stand financially (their data).

- We know what Lending Club looks for in approving folks to get debt consolidation loans.

- We can run this user's data against what we know about Lending Club's model, and see if (A) they would be likely to qualify and (B) it would save them time or money. If these things turn up true, we recommend to the user that they go apply, showing them the data that led us to this recommendation.

- If they apply for and get a loan from Lending Club, we get a referral fee.

Up until the user decides to go apply for a loan, we have sent no data at all to Lending Club.

This kind of model is how we plan to approach the whole business. It's about giving people control over their financial situation and data, not taking it away. There are plenty of opportunities for us to profit with this model in an open, ethical, and transparent way, all the while keeping people in the driver's seat.

In the realm of software, which is diffuclt to defend, I like how much of a barrier to entry these companies create just by virtue of collecting data no one else does. Even google can't really compete here right away, because in each vertical space data has its own dimensions and requires different methods. I imagine this is one of the areas of software still really attractive to big VC money. (Not that it ever wasn't, it's just a lot easier to build now)

I'm wondering if proprietary data startups kill the "open" internet. Do any of these companies allow users to collect all of the data that they generated and export it?

I keep hearing proprietary data killing the Internet. But before these businesses (and Google, Facebook, etc) came about, the data wasn't on the web.

The 'open' Internet is not dying, it never existed.

I never even considered that. Perhaps many of the projects that attempted to build open semantic containers for blog data, forum data, etc. were looking for a solution to a non-existant problem. (FOAF, RDFa, etc.)

TFA, shortened: internet startups focus on processing user data.

This is news?

It seems like the major newspapers source their stories from the HN front page. It's great that they're listening - but, if they are just relying on HN and the signal and noise around it, they should also step out of this field of myopia and deliver original insights and breaking news, as well - you know, add to the conversation.

(edit: Major newspapers, like the Economist, are usually more thorough in their analysis than an HN commentator or a blog post. So, they definitely have plenty of value in the information stream, but rather than recycling and refining stories and ideas, they should also be encouraging new insights.

These startups are directly profiting from their ability to extract information that others can't.

They're NOT serving you recommendations of others' products. They're NOT serving you ads.

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