Tilte：Valuing Data as an Asset

Author：Laura Veldkamp

Summary：In the twenty-first century, the most valuable firms in the world are valued primarily for their data. This makes data central to finance. Data is an important asset to price, it changes firm valuation, and it is a key consideration for an entrepreneur starting a new firm. The rise of the data economy is changing sources of revenue and sources of risk (Chiou and Tucker, 2017; Goldfarb and Tucker, 2019; Lambrecht and Tucker, 2015). The industrial-age measurement and valuation tools commonly used in finance need updating for a new era. The goal of this article is to describe a set of tools to measure and value data and point to unanswered questions, where more work is needed.

Link：https://doi.org/10.1093/rof/rfac073

Key takeaways:

• The goal of this article is to describe a set of tools to measure and value data and point to unanswered questions, where more work is needed.

• Section 1 describes what data is and how it differs from other assets and concepts. Section 2 explores the supply side of data: how data is produced, accumulated and depreciated. It introduces a distinction between raw data,structured data, and knowledge.

• Section 3 turns to the demand side with tools to infer a firm or an investor's quantity and value of data Approaches to valuing data include a cost approach, a revenue approach, value function estimation, and using complementary inputs. Section 4 compares data as a way to enable better matching versus data as information

• Firms use data to advance their objectives in four ways: improving business processes, reducing risk, growing market power and innovating.