At the New York Auto Show this week, car fans, journalists, and industry watchers were treated to a feast for the eyes, with all the new car designs and plush interiors on display.
Under the skin of these cars, however, is a different beast — and it’s not the engine. It’s all the data these cars generate.
McKinsey estimates a car produces around 25 gigabytes of data per hour, which is an astounding amount. And this data is worth big money.
“The car has really turned into a modern computer and one that many people use as often as their regular computers,” Narrative CEO Nick Jordan says in an interview with Yahoo Finance from the floor of the New York Auto Show. Narrative is a data commerce platform that helps companies buy and sell data from each other, and helps optimize the data’s value. Jordan likes to say data is the “new oil.”
“[The automakers are] evolving their business to think of it as a data collection mechanism and then figuring out ways to use that data, everything from the direct monetization of the data, to providing better in-car experiences, and then even working with partners like insurance companies to build a— you know, a more vibrant ecosystem,” Jordan says.
The data itself is worth something, but it can be worth a lot more if the automakers know how to exploit it. Jordan says it’s a combination of collecting the data, and commercializing it to get to real value.
“In the earlier stages, where [the automakers] have a limited number of sensors, they’re doing limited data collection, it’s probably about $100 over the lifetime of a car,” Jordan says. “As they get better, estimates go up to about $700 over the lifetime of a car, and so if you’re selling tens of millions of cars, you know, it’s a multibillion opportunity and industry for them.”
Of course some companies are doing data collection better versus the traditional automakers. Jordan says Tesla (TSLA) is one of them.
“Look at how Tesla upgrades people,” Jordan says when referring to new driving modes like Full Self Driving or Ludicrous mode. “Part of that is actually based on the driving behaviors of the people in the car to know that their specific driving patterns may lend itself to someone that wants to drive faster, or have more horsepower on a moment’s notice.”
Which brings us to subscriptions. Believe it or not, cars now and in the future may ask you whether you’d like to, say, have navigation services that you can pay on a monthly basis and cancel anytime. This may come in handy for someone who won’t be driving for an extended period of time.
This is already happening right now, with Cadillac (GM) offering its Supercruise driver assist technology as a subscription service. Tesla is doing the same with Full Self Driving.
“Adobe (ADBE) has done this famously,” Jordan says when discussing a Adobe’s Photoshop software that went for full upfront pricing to a subscription service. Jordan believes this is where automakers can learn something from big tech’s subscription pricing model.
“What’s interesting is, well, that’s obviously more valuable for Adobe,” Jordan says. “Their customers actually love it because now they can turn it on and turn it off based on when they’re actually going to use the product.”
There is a dark side to big data — and that is privacy and exploitation of data that users may consider their property. Here is where the automakers must tread carefully, Jordan says.
“I think the first rule there is ‘do no harm,’” Jordan says. “Make it apparent to the customers what data is being collected and how it’s being used, and ultimately adding value for the customer, right? If you can give them something they want that is dependent on the data, then that becomes a symbiotic relationship versus, you know, one entity taking something from the other entity.”