A year ago the management consulting giant McKinsey & Co. predicted that the internet of things (IoT) could unlock $11 trillion in economic value by 2025. It's a bold claim, particularly given that IoT currently proves more useful in launching massive DDoS attacks than in recognizing that I need to buy more milk.
Now, McKinsey has a new projection. It involves cars, and it declares that data "exhaust" from autos will be worth $750 billion by 2030. The consulting firm even goes so far as to lay out exactly how we can grab that revenue. If only it were as easy to make money off car data -- which consumers may not want to share -- as it is to prognosticate about it.
Follow these two easy steps
The automotive industry is huge, which is a big reason that Google, Apple, and others have been looking for opportunities to disrupt it in their favor. Given how much time we spend in our cars, particularly in North America, and how much data those cars generate, it's easy to imagine massive new auto-related businesses built entirely on data. After all, Uber is a giant data-crunching company, not a cab company.
This isn't simply a market for one Uber to dominate, suggests McKinsey in its new report, "Monetizing Car Data." As the report authors conclude, the opportunity to monetize car data could be worth $450 billion to $750 billion within the next 13 years.
The hitch is getting there. According to McKinsey's analysis:
The opportunity for industry players hinges on their ability to 1) quickly build and test car data-driven products and services focused on appealing customer propositions and 2) develop new business models built on technological innovation, advanced capabilities, and partnerships that push the current boundaries of the automotive industry.
Let me paraphrase: $750 billion can be had by anyone who can 1) figure out cool new products that lots of people will want to buy and 2) sell those products in such a manner that people will pay for them. Um, thanks, McKinsey!
What the report doesn't say is that auto exhaust, the data on which these hypothetical businesses will be based, may be a little more closely guarded than web exhaust.
Ideas are easy, execution is hard
In a rather blithe and generic manner, McKinsey gets one thing right about this new market: "The first challenge on the path towards car data monetization is communicating to the end customers exactly what is in it for them."
On the web, the value proposition of giving up personal data in exchange for free stuff has simply become part of the furniture. The tech industry has no problem treating consumers as products. Last week, for example, Google (very quietly) changed its ad policies to enable much more invasive tracking of consumer behavior.
Will it be any different in Autopia?
Let's assume for a minute that it will be. After all, data about where you go and how you drive generally has more serious implications than which websites you visit.
What's the incentive for consumers to share that data? McKinsey lists a range of reasons, from consumers opting into proactive maintenance, better insurance rates, and more. However, these suggestions tend to overlook history: We haven't generally been willing to proactively pay for security, we don't like the idea of giving insurance companies the ability to lower our rates through data (because it will more likely result in raising our rates through that same data), and so on.
On the other hand, we may simply not care enough to stop it. The younger the demographic, the less likely it is to be concerned by privacy, the report unsurprisingly finds, while 90 percent of those surveyed by McKinsey are already aware that "data is openly accessible to applications and third parties." Given that Pandora's box filled with data is already open, it's not surprising that 79 percent of those surveyed are "willing to consciously grant access to their data," a percentage that has climbed 11 points since 2015.
Yet businesses still need to figure out how to monetize this willingness to trade data for services. Uber has already figured it out and presumably plenty more such companies are waiting to be born. The market for car data will likely be big, but capitalizing on it will plow through consumer privacy in ways hitherto unimagined.