Valuation of Data under Different Utilization Strategies

In an article in “BewertungsPraktiker”, Matthias Meitner addresses the asset “data” in the context of business valuation and in which way it provides value contribution in modern, data-driven business models.  He emphasizes that data are not per se increasing business value, but generally only do this, if they are a specific advantage, instead of being in principle accessible to all market participants.  The article further elaborates on three generic models in which “data” can be involved in the business model: as a network effect, scale, and embedding.  Where the data can involve network effects, the benefits for the user may increase with the total number of participants that are interacting.  However, the author also illustrates that such network effects may require active ongoing development and under certain conditions more focused networks with – in absolute terms – fewer participants may be more beneficial for the users.  The most prevalent way to utilize data in business, according to Meitner, involves the scale of the available data without interaction between the users.  Possible issues with this utilization method are that at some point – earlier or later – the value added by additional data decreases substantially and that similarly at some point the costs for obtaining high-quality data increases materially.  The final model looked at is embedding, where data collection and processing is embedded in devices.  The article furthermore addresses some issues that may arise, when the value contributions of data are to be analyzed.

The article by Meitner was published in the September 2021 issue of “BewertungsPraktiker” on pages 74 through 83.