Why The CRE Industry Should Stop Giving Away Its Oil
You’ve undoubtedly heard the phrase “data is the new oil”. It refers to the driving force of the digital economy being data, as compared to the oil that powered (and still powers) much of our economy for the past 150+ years. And just like oil, for data to be useful it needs to be refined. Raw data needs to be turned into intelligence and insights through data analytics so that it can drive decision-making and create value.
Some of the biggest companies today are in fact data companies. We might think of Google as a search engine, but its main business is using data analytics to sell targeted advertising to its customers. And it keeps improving at this, widening the gap with its competitors, because it uses data to optimize its products and services so that we keep using it and keep seeing those adverts. This is what drove $61 billion in search advertising revenues in the last quarter of 2021, and a current market cap of $1.5 trillion (!) for Google’s parent company, Alphabet.
Similarly, we may think of Netflix as a media company. But the reason why it blew past its traditional competitors is that its real business was using data to determine which shows and movies would attract and retain subscribers. Netflix uses data to optimize itself to such an extent that we all see different trailers for the same show based on our viewing history. This data-based insight is what has driven 2021 revenues of $30 billion and a market cap of $100 billion.
So far, so interesting, but what has this got to do with the CRE world? There’s no denying that the CRE industry is a data-driven business. From where to buy or build; to what to invest in and when; and the comparison of property performance versus comparables; data is key. The player with the best insights will consistently make better calls and outperform their peers. This is why CRE firms routinely spend a substantial amount of money on data subscriptions each year.
But CRE firms that don’t realize the value of their own data and give away ownership of it to service providers are essentially allowing someone else to drill in their backyard, refine the oil they receive and then sell it back to them. This doesn’t make sense in 2022 when you can easily subscribe to SaaS companies that don’t demand control of your data as a prerequisite of doing business with them.
To further extend the metaphor, it is important to consider that if you are a third-party services firm (appraiser, outside underwriter, etc.) you might be acting like a caretaker opening the gates and allowing someone else to drill for oil in your client’s backyard. You might be giving away your client’s data without their knowledge or consent if you use one of the tools that insist upon taking ownership of your data as part of their terms of service.
Lastly, it is important to think about what your service provider is going to do with your data once you sign it over to them. In some cases, it may go beyond simply monetizing it and selling it back to you. If the company uses the data to expand into auxiliary businesses that compete with your core business, using the data you have legally given them access to, that’s a lot more problematic!
But, until organizations realize the value of the raw data they own and create, they’ll continue to hand over their oil rich lands to others.
We love data and believe passionately that businesses should unlock the value in theirs. If this topic strikes a chord with you, we’d love to discuss it further. Reach out and let’s arrange a chat.
About Rockport VAL Rockport VAL is the long-awaited and requested alternative to ARGUS®. VAL is user-friendly, affordable, powerful, and connects easily into your tech ecosystem. Even better, you don’t need to hand over ownership of your customer data just to sign up. Try VAL for free
About Rockport Rockport provides a SaaS platform for all facets of the commercial real estate life cycle. Founded by Rick Trepp, founder of Trepp®, Rockport has been a trusted partner for systems & digital infrastructure to the largest CRE players for the last 20 years. Learn More