Big Data expert and automotive technologist John Ellis argues that vehicle data is so valuable that drivers will get a free car in return.
Mr. Ellis, mobility for most of us right now is very simple. If I want a car, I buy or rent it. On the other side, there’s a company that manufactures a car and sells it to me. How will that landscape change?
First, manufacturers or OEMs will have to go through a business model change very shortly. It’s a very simple relationship at the moment. They build a car, sell the car, they make their money on the sale, and then they forget about the car. Sure, they have a warranty and try to stay in touch with their customers, but generally there’s a middleman or dealer. The OEM has left the scene to work on the next car. A new model would be: You sell through a direct relationship with the customer and understand how they use it. You have a conversation. It’s an active engagement that you can see in every other area of consumer goods, take Apple and smartphones. This also gives you the ability to continually create value by sending new features out that weren’t previously considered and add them to the vehicle. In some cases you charge money for it, in some cases you’re giving it to the consumer for their loyalty.
That’s a big shift from the producer’s side. What other changes will go along with it?
The second big shift is in people’s mindsets what a car represents, at least in the US. When I was growing up, the idea of a car was freedom, the ability to get in and go. Today, just looking at my own kids and doing ethnographic research, we see that the idea of time and space is addressed digitally. My son now plays games with people from all around the world, they’re connected, they’re talking. The value of the car as a precursor to freedom and movement isn’t as strong as it used to be. On top of it, we have the sharing economy. But probably the biggest change is the shift from individually owned to just buying a seat in someone else’s vehicle and using it like a seat in an airplane. That’s transportation as a service. All of this will happen over the next five to ten years.
The value of the car as a precursor to freedom and movement isn’t as strong as it used to.
You wrote a book with the provocative title “The Zero Dollar Car”. Are you suggesting that having or using a car will be free?
No, I’m not. The so-called “zero dollar economy” is not an economy where everything is free, but many things are underwritten by advertisers and sponsors. It probably started with newspapers running ads, and Google has taken the idea to a whole new level. Whether it’s Google, Facebook or Pinterest, all these digital offerings are not really free. We are transacting with our data. And there’s no reason the same model can’t apply to cars. I see a future where the value of the data produced by a car is as high as its purchase price, making it effectively free of charge. Companies that want that data will underwrite the purchase of a vehicle for us.
I see a future where the value of the data produced by a car is as high as its purchase price, making it effectively free of charge.
Walk us through your calculation. How can a $40,000 car cost nothing when I want to buy it?
All the sensors in a modern car are there because of the careful consideration of the automotive engineers who want to improve the safety of the vehicle, the emissions and the comfort of its passengers. At no time were they trying to figure out how to monetize it. But there are others who really want that data. Let’s assume you agree to sell the data from just six sensors: traction control, headlights, clock, wipers, rain and barometer. Those are all readings relevant for weather, and you could sell that data for the lifetime of the car for $3,000. You’re down to $37,000. Next are the suspension-monitoring sensors. They could record any rough patch of road that needs repairs. Government agencies might want the data because they have to maintain roads and highways. One agency in just one state might value this at $2,000.
That brings us down to $35,000…
Let’s go to microphones. They are becoming a standard feature. A company like Google could pay you $5,000 to get access to what you say and search for while driving to improve things like search and navigation. Selling your speed readings and camera data would knock off at least another $2,000, so we’re already at $28,000. You can continue with data from other sensors and how it can be repackaged into new data bundles, especially when we’re talking about autonomous vehicles where the passengers read, shop and play on their devices. And before long we’re at the zero dollars for the car.
People are beginning to realize that they are the product the tech firms turn into money and profits, and we need to raise this awareness.
And exactly how will the value of my data sets be determined?
My example to get from $40,000 to zero is hypothetical, but the numbers are based on real conversations with big brands, advertisers and people who work for public agencies like the transportation department of a state or the National Oceanic and Atmospheric Administration. Now how does Google figure out how much a particular word in a search is worth? They do it by real-time auctions in milliseconds. They’ve built amazing online marketplaces for advertisers. One thing is missing so far — the end user like you and me who generates or provides the data. But people are beginning to realize that they are the product the tech firms turn into money and profits, and we need to raise this awareness.
Who will drive this new model to underwrite a “free” car?
Tech companies like Google or Facebook, because they care about the data. They see many sensors that allow combinations we’ve never considered before. That’s very valuable for software companies that know how to collect, process and analyze data — and more importantly know how to create markets around that data. I know for a fact that many big car manufacturers are thinking about this type of monetization post-sale and want to figure out relationships and sales propositions for vehicle data. But that can only happen if consumers understand the real dollar value of the data they generate by driving. If it’s my car and my data, why can’t I get a piece of it?
If it’s my car and my data, why can’t I get a piece of it?
What makes you certain that consumers or drivers will get money for their data?
History has shown that we can get to free products and services in return for data. It’s possible in the transportation arena too, as part of the big changes I described. What’s really powerful about the car is that you’re already in it. A brand doesn’t have to convince you to get up from your desk or couch as with marketing on TV, radio or a computer. You’re already in motion, probably looking for something. I can envision a world where brands that you love and interact with daily are willing to fully fund a transportation session in return for marketing and selling to you, putting their food or coffee in front of you.
We are giving away a lot of our data every day when we go online or use smart devices. Why should we have more leverage with car or mobility data?
Unlike most digital products — the browser, email, productivity suites or social networks — purchasing a car is actually embedded in a very strong contractual framework. Once a consumer understands that they are sitting on valuable data, they can become an informed participant in this market. What we need are new data brokers for mobility that can be the middlemen to get a good deal for us. There are already new players that try to build and make these markets.
What we need are new data brokers for mobility that can be the middlemen to get a good deal for us.
Doesn’t this subsidy idea of Zero Dollar Car become very complicated once the model shifts from outright ownership to usership: Who owns what when?
The transition period will be complex. Let’s assume individual ownership stays. The owner says: Yes, I agree that my data can be sold. In which case the paperwork for purchase or lease reflects the price adjustment. Now let’s assume I decide in a few years I don’t like how my data is being analyzed and want to quit. We could reissue the contract, change the payment rate and usage instructions. What we still need to figure out are the right tools and auditing capabilities to prove that nobody is any longer collecting and using your data. That will be complicated.
What about people who don’t want to participate and keep their car data to themselves?
They’d have to pay the full price and in essence purchase privacy. The manufacturer now is contractually obligated to fulfill your purchase. No collection of data.
John Ellis is a Chicago-based big data expert and author of the book “The Zero Dollar Car”. From 2012 to 2014 he worked as global technologist for Ford and before was an executive at Motorola, where he was responsible for wireless software and services. He’s online at www.johntellis.com