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About a decade ago, publications like WIRED and The Economist began suggesting that data might become the most valuable resource in a digital economy. “Data is the new oil” became a popular mantra. It was a quick, concise way to summarize some very important changes taking place across the entire economy as companies with access to cheap, plentiful data began to reshape entire industries. And nowhere is this more evident than within the social media industry.
How Facebook used data to disrupt traditional media
Think back for a moment to when Facebook first started to make its presence felt within the social media industry. Until the arrival of Facebook, nobody really knew how much time someone spent reading an article, how that article was shared, or how to design specific ads for each unique person. But now that situation has changed dramatically. Facebook knows how you arrived on an article, how much time you spent reading it, and how you are consuming it. Based on all of these variables, it has a very good idea of what to show you next in your news feed. It knows exactly how to make each piece of content as compelling as possible. Facebook knows you far better than any traditional media publication ever did, and that’s how it managed to disrupt an entire industry.
The rise of the algorithm
The key to using all this data, of course, is the algorithm. Every social media company has a proprietary algorithm that determines success on the platform. On YouTube, for example, every video creator wants to get his or her content shown as widely as possible, and one key to that is getting as many likes, subscribers and comments on a video as possible. Moreover, it’s absolutely critical to maximize the watch time of a video, which is why YouTube creators are constantly reminding you to “watch until the very end.”
Depending on the social media platform, the algorithm can have immediate effects on the ability of a company to reach a wider audience. Brand marketers often complain that they create so much content, but nobody is consuming it. The reality, quite simply, is that there is simply too much content for Facebook or any other social media platform to show you all of it. So the algorithm determines what gets seen, when, and by whom. The algorithm can be tweaked, but it is generally calibrated to prioritize content that gets shared as much as possible.
The data economy
There are drawbacks to all of this data and all of these algorithms, of course. If traditional oil is responsible for greenhouse gas emissions, dirty pollution and other negative externalities, then “digital oil” (i.e. data) is also responsible for its share of negative externalities. Think about governments trying to use this data to manipulate elections, spread propaganda, and influence segments of the population to act in a certain way. Think about all the bad actors out there – such as hackers, spammers, and foreign espionage agents – who now view your personal data as something worth tracking, manipulating or just plain stealing.
So maybe the lesson in all of this is that, if data really is the oil of the digital economy, it comes with positives and negatives. It really depends on how you use it. Just as most of us put up with the daily pollution that comes from driving gas-powered cars, most of us also put up with the daily digital pollution that comes from so many companies trying to buy and sell our data. Going forward, the next decade might be all about how to deal with all this digital oil coursing through the global digital economy.