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The hottest new industry

  • Financial Analyst
  • Blog post submitted on 10th April 2019
06744 CC Trader Talk V2

Forget bitcoin or any cryptocurrency, the hottest new industry is mining. No, I am not referring to the mining of precious metals or oil but data. Data harvesting is the fastest growing industry in America according to the Financial Times, an industry currently worth $76bn and set to more than double that by 2022 to nearly $200bn.

Have you ever googled a trip to Venice and suddenly adverts appear on Facebook or an article you’re reading elsewhere offering weekend offer deals in a hotel just off Piazza San Marco? That’s the result of data mining, and is called targeted advertising revenue. This 21st century resource extraction is the target of major technology companies who process, analyse and re-sell this data to willing customers which are typically involved in the marketing of products and services.

Companies which are typically involved in content provision are at the forefront of this race, competing for your attention via television, your smartphone or your PlayStation. Whatever their weapon of choice, they are creating an eco-system which is designed to return to their platforms via the content they provide and profile your main areas of interest in order to monetise your activity in the most effective way. Industry players are coining it surveillance capitalism, whereby you aren’t just the product to be sold to advertisers, you are also the raw material to make the product used to sell you to advertisers.

Relatedly, you may notice that tech unicorns, which are valued both pre and post IPO at billions of dollars, in most cases don’t even post a profit. In fact most post huge losses, yet their valuations keep climbing. This is because the focus of these companies is not profit growth, but revenue growth which is directly related to the growth in number of users using their product or service.

The biggest threat to this industry is regulation. According to the Financial Times, the Tech industry makes over half of its revenue from targeted advertising revenue. If you remove the ability of these companies to monitor the content you consume, it would significantly impact their business model. Data privacy has been at the forefront of regulators’ radar across the globe, the most prominent of which was the GDPR regulation implemented in Europe. This has done little, however, to stem the growth of the industry worldwide.

I suspect that going forward, there will be an inevitable push for more regulation as the industry evolves and end users inform themselves better of just how deep the data profiling goes.

It may interest readers to know for example that voice activated programs such as Amazon’s Alexa has the ability to mine data continuously in the background while you are not engaging it, listening in on your conversations and profiling accordingly.

The issue of privacy remains high on the agenda among regulators, and should be monitored by market practitioners as they could potentially cause significant permutations to different industries, especially as most are becoming ever more digitalised.

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