data monopoly

1. COMPETITIVE STRATEGY
Data Monopolists Like Google
Are Threatening the Economy
by Kira Radinsky
MARCH 2, 2015
The White House recently released a report about the danger of big data in our lives. Its main
focus was the same old topic of how it can hurt customer privacy. The Federal Trade
Commission and National Telecommunications and Information Administration have also
expressed concerns about consumer privacy, as have PwC and the Wall Street Journal.

2. However, big data holds many other risks. Chief among these, in my mind, is the threat to free
market competition.
Today, we see companies building their IP not solely on technology, but rather on proprietary
data and its derivatives. As ever-increasing amounts of data are collected by businesses, new
opportunities arise to build new markets and products based on this data. This is all to the
good. But what happens next? Data becomes the barrier-to-entry to the market and thus
prevents new competitors from entering. As a result of the established player’s access to vast
amounts of proprietary data, overall industry competitiveness suffers. This hurts the
economy.
Federal government regulators must ask themselves: Should data that only one company
owns, to the extent that it prevents others from entering the market, be considered a form of
monopoly?
The search market is a perfect example of data as an unfair barrier-to-entry. Google
revolutionized the search market in 1996 when it introduced a search-engine algorithm based
on the concept of website importance — the famous PageRank algorithm. But search
algorithms have significantly evolved since then, and today, most of the modern search
engines are based on machine learning algorithms combining thousands of factors — only one
of which is the PageRank of a website. Today, the most prominent factors are historical search
query logs and their corresponding search result clicks. Studies show that the historical
search improves search results up to 31%. In effect, today’s search engines cannot reach high-
quality results without this historical user behavior.
This creates a reality in which new players, even those with better algorithms, cannot enter
the market and compete with the established players, with their deep records of previous user
behavior. The new entrants are almost certainly doomed to fail. This is the exact challenge
Microsoft faced when it decided to enter the search market years after Google – how could it

3. build a search technology with no past user behavior? The solution came one year later when
they formed an alliance with Yahoo search, gaining access to their years of user search
behavior data. But Bing still lags far behind Google.
This dynamic isn’t limited only to internet search. Given the importance of data to every
industry, data-based barriers to entry can affect anything from agriculture, where equipment
data is mined to help farms improve yields, to academia, where school performance and
census data is mined to improve education. Even in medicine, hospitals specializing in certain
diseases become the sole owners of the medical data that could be mined for a potential cure.
While data monopolies hurt both small start-ups and large, established companies, it’s the
biggest corporate players who have the biggest data advantage. McKinsey calculates that in 15
out of 17 sectors in the U.S. economy, companies with more than 1,000 employees store, on
average, over 235 terabytes of data—more data than is contained in the entire US Library of
Congress.
Data is a strategy – and we need to start thinking about it as one. It should adhere to the same
competitive standards as other business strategies. Data monopolists’ ability to block
competitors from entering the market is not markedly different from that of the oil
monopolist Standard Oil or the railroad monopolist Northern Securities Company.
Perhaps the time has come for a Sherman Antitrust Act – but for data. Unsure where you come
down on this issue? Consider this: studies have shown that around 70% of organizations still
aren’t doing much with big data. If that’s your company, you’ve probably already lost to the
data monopolists.
Kira Radinsky is the CTO and Co-founder of SalesPredict, a customer lifecycle intelligence provider helping
marketing and sales professionals increase conversion rates and accelerate sales cycles using predictive analytics. A
noted data scientist, Kira was included in MIT Technology Review’s 2013 “35 Innovators Under 35″ and in 2014 Forbes

4. named her one of the 50 Most Influential Women in Israel.
Related Topics: DATA | NATIONAL COMPETITIVENESS | REGULATION
This article is about COMPETITIVE STRATEGY
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5 COMMENTS
FJJARIEGO Jariego 14 days ago
HI Kira, your argument is basically the one behind the ‘essential facilities doctrine’, which requires a
monopolist or a dominant firm to provide access at a “reasonable” price to an essential or bottleneck facility
that the monopolist controls and that is deemed necessary for effective competition and consumer welfare.
The question is whether that data (Google's or similar) is actually an essential facility. My take here:
http://pacojariego.me/2015/03/08/should-we-get-rid-of-data-monopolies/
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