Study: Data-Driven Marketing Adds $156 Billion to the U.S. Economy
October 14, 2013 -- A unique Direct Marketing Association (DMA) study quantifying the value of the Data-Driven Marketing Economy (DDME), both in terms of revenues generated for the U.S. economy and jobs was recently conducted with the aim to "systematically and objectively map, measure, and analyze the DDME."
The Value of Data: Consequences for Insight, Innovation, and Efficiency in the U.S. Economy, commissioned by The Data-Driven Marketing Institute (DDMI), an initiative of the DMA, and undertaken by Professors John Deighton of Harvard Business School and Peter Johnson of Columbia University, aims to "fill a significant gap in understanding about massive changes currently transforming the U.S. marketing and advertising industries – changes propelled by the growing quantity and variety of data available to businesses and consumers alike."
The study investigated two questions:
• How much incremental value does data-driven marketing contribute to the U.S. economy?
• How much of this value is accounted for by the flow or transfer of data among firms?
By summing the net revenues from the provision of data-driven marketing services for all firms that were investigated as participants in the DDME, and subtracting for costs of inputs among sub-systems, the study found:
- Data-driven marketing added $156 billion in revenue to the U.S. economy and resulted in the employment of more than 675,000 in 2012.
- The authors determined approximately 70% of the data-driven marketing economy, or $110 billion, and 475,000 jobs, "depend directly or indirectly on individual-level data exchanged among firms. If individual-level data could not be transferred among firms, it would cost the U.S. economy significantly more than $110 billion to match buyers and sellers at the same rate and maintain U.S. output at current levels."
The DDMI commissioned this data-driven marketing study to give policymakers in Washington "facts about the role of responsible data use in fueling innovation and economic growth, the benefits that the data-driven marketing economy provides to individual businesses and the U.S. economy as a whole – and what would be lost if regulation impeded responsible exchange of (individual-level consumer) data across the DDME."
About: This study investigated directly the revenues generated by over 650 firms for provision of services to producer firms, services that supported one or more individual-level consumer data (ILCD) dependent practice. The authors studied how these supplier firms differentiated themselves in the marketplace, in order to identify key sub-systems of buyers and sellers of intermediate inputs. Among inputs, they focused first on the cost of media, and second on the cost ILCD, both when it was a tradable good and when it was bundled as part of a service. This analysis identified and removed instances of double-counting to arrive at both a more accurate valuation of the overall size of the DDME, as well as a clearer picture of the degree of interdependence among classes of firms in the exchange of ILCD among owners, users, and servicers in creating the efficiencies provided by the DDME.
Source: The DMA's Data-Driven Marketing Institute (DDMI), The Value of Data: Consequences for Insight, Innovation & Efficiency in the U.S. Economy, by John Deighton of Harvard Business School and Peter Johnson of Columbia University, accessed Oct. 18, 2013.