Ignore data at your peril – creatives may be divided over data's value, but the money men know its worth
Over the past couple of years, my colleagues and I have found ourselves writing increasingly about data.
Sir John Hegarty has voiced his data doubts
Once the preserve of geeks, analysts and suspiciously corporate types, data (and the need to acquire and analyse it) now seems to be moving centre stage – and, I would argue, is now a prime driver in mergers and acquisitions activity. It’s certainly been behind many of this year’s most important deals.
And over the past few weeks, data has risen to the very top of the marcomms news agenda.
First of all, there was adland legend Sir John Hegarty’s widely reported (and typically contrarian) rant against data – which, he said, had never created wealth, unlike creativity (presumably, the kind of creativity that made him famous).
Speaking at the Advertising Week conference, Sir John asserted: “I would actually argue that data has never created wealth, never. Creativity has, all the time. Because it imagines something. And people go, ‘I like that. I respond to that’.
“But data in itself creates nothing. It’s creativity which makes things. We’ve got to remember that. If you’re an organisation trying to increase your profitability, or expand your market, data is very important. But it’s creativity that will make that happen.”
Sir John’s rant is nothing new, of course – creatives have been grumbling about the incursion of data into agency process and life for some time now – but when someone of Hegarty’s stature speaks out, people tend to sit up and listen.
Many within the industry – in DM and digital especially – might have wondered if Sir John was losing the plot. Indeed, many have argued (and I would concur with them) that Hegarty is right. Data is, in and of itself, dull and inert; it doesn’t create wealth. What counts is its accuracy, how you analyse it, and what you do with the stories the data is telling you. Indeed, data could be one of the biggest boons to creativity since the invention of TV advertising (and perhaps Sir John is worried that clients will put all their money into eCRM, DM, SEO, DRTV, VOD, email, native advertising and the like, rather than the glossy – and, let’s face it – brilliant TV ads that made his name).
Just a few days later, no less a figure than Sir Tim Berners-Lee argued that consumers should value their data more – and maybe start charging brands for the privilege of accessing and using it.
Speaking at the IP Expo trade event in London, Sir Tim said: “I would like to build a world in which I have control of my data. I own it and can sell it to you if it is worth it, we can negotiate a price for it to be used for advertising.”
“That data that [companies] have about you isn’t as valuable to them as it is to you,” he said. “I have almost a year’s worth of data from [Facebook-owned location-tracking app] Moves. I can see how my exercise has gone up and down.
“In general … if you put together all that data, from my wearable, my house, from other companies like the credit card company and the banks, from all the social networks, I can give my computer a good view of my life, and I can use that. That information is more valuable to me than it is to the cloud.”
It’ll be some time, I suspect, before the idea of consumers bartering their data with brands and agencies becomes a reality, but it’s certainly an intriguing prospect. And of course data is valuable – and this assertion is borne out by one company: Tesco.
Given its woes these past few months, it’s easy to forget that Tesco is still the UK’s biggest retailer (it has a staggering 28.8 per cent share of the grocery market), our largest employer and the fourth-largest retailer in the world. But 20 or so years ago, it lagged way behind M&S and Sainsbury’s. One of the things that transformed it from a “pile it high, sell it cheap” grocer into a retailing behemoth was the Tesco Clubcard.
Set up by the start-up data firm Dunnhumby (now itself owned by Tesco), the Clubcard was mocked by rivals at launch, but the loyalty card was a stunning coup for Tesco. It not only allowed the supermarket to say 'thank you' to customers and reward them for loyalty, but it also allowed them to collect huge amounts of data on them.
This info, when analysed, then allowed Tesco to improve its offer to customers, either en masse, or individually. Sniffy competitors may have written Clubcard off as a 1990s version of Green Shield Stamps, but Tesco had the last laugh as it grew and grew, eclipsing all rivals. All that data was used to ruthlessly hone the retailer to give people what they wanted.
However, in recent years, Tesco has concentrated more on 'price matching' strategies and in-store promotions, rather than listening to its customers (which Clubcard certainly allowed it to do), and the once class-leading loyalty scheme’s importance has declined – which may account, at least in part, for the headache that new CEO Dave Lewis has to deal with.
In fact it’s rumoured that in the course of his ongoing review of the entire business, Lewis may sell off Dunnhumby (private equity specialist TPG is rumoured to be interested). It’s tempting, because the business would undoubtedly generate significant value, which would come in very useful. And of course, Dunnhumby could remain as a supplier (it not only serves Tesco’s data needs, but those of hundreds of other clients, including blue-blood blue-chips like Coca-Cola, P&G, Diageo and GSK).
But a sell-off, while netting valuable cash, could prove costly in the long term. Not only would an important source of data be choked off, but customers are likely to take it badly – the card is still very popular. And given that many retailers – including that other struggling grocer, Morrisons – are launching their own loyalty schemes, it would put Tesco at a disadvantage.
The wily Maurice Levy is playing in this space having just (on Monday) shelled out up to £50m to buy a 25 per cent (initially 20 per cent, with the other 5 per cent optioned) stake in Matomy. And what is Matomy? It's a Tel Aviv-based specialist in so-called performance-based advertising, which allows firms – such as Experian, American Express and HSBC – to buy advertising with specific goals such as website views or sale conversion rates. In essence, it’s a data firm, built on the intelligent analysis of numbers. And, what’s more, the Matomy stake is one of just five 'data deals' completed in the past four weeks.
With the likes of Levy, and his great rival Sir Martin Sorrell, buying up data firms all over the place, it’s clear that data is where the action is. If Lewis wants to make Tesco great again, he needs to think carefully about his next steps.
Tony Walford is a partner at Green Square, corporate finance advisors to the media and marketing sector