Big Data

The Value of Data: Google Gets It!

Bill Schmarzo By Bill Schmarzo June 10, 2014

Google has officially invaded my local Starbucks hang out. The Google “Free WiFi” splash page below (Figure 1) greeted me the other day when I opened my browser and got ready to enjoy my venti, non-fat, no-water chai latte. Yep, Google has invaded this space as well. And for Google, and maybe even for me, it makes total sense.

Figure 1:  Google's Starbucks Welcome Splash Page

Figure 1: Google’s Starbucks Welcome Splash Page

Given the frequency of my Starbucks usage, I decided to play detective and try to tease out more details on this deal, and what we (in the burgeoning Big Data world) can learn from two of the masters of big data – Google and Starbucks.

At Starbucks, AT&T is out and Google is in for Wi-Fi

Let’s start this detective journey by understanding the base agreement between Google and Starbucks. As outlined in the C|Net article “At Starbucks, AT&T is out and Google is in for Wi-Fi” July 31, 2013:

Starbucks has opted to use Google Wi-Fi to give its U.S. customers up to 10-times faster network speeds. Google will be providing Wi-Fi service in Starbucks’ U.S. locations that’s up to 10 times faster than the current service powered by AT&T.

The move toward faster Wi-Fi comes as mobile and PC users increasingly require faster connection speeds to do things like stream video and download large files. Starbucks’ free Wi-Fi has long been popular among Internet users, with millions accessing the service each week. The faster connection speed is likely to attract even more visitors, particularly as carriers move away from offering unlimited data plans for mobile devices.

Along with providing faster Wi-Fi, Starbucks and Google also will be working to upgrade the Starbucks Digital Network, the page where users are directed when accessing Wi-Fi in the coffee shops.”

This seems like a winning deal for Starbucks customers like me: much faster Internet speeds for doing my most valuable browsing, social media posting, and email. But what does Google get out of this deal? Let’s add some insights from Rob Powell in his article “Parsing the Starbucks/Google/Level 3 WiFi Deal,” from Telecom Ramblings, August 4th, 2013:

The money involved will be minor to Google, but it’s about the customer relationships and the wresting of more eyeballs from a monopoly controlled last mile. In light of their expansion of Google Fiber to new markets, their long dalliance with WiFi overall, and the submarine cables they’ve been dabbling in, they’re now unequivocally a network operator in addition to being a content provider. And given the simmering disputes between content and the last mile, the more endpoints that are free of the incumbent the better for their long-term opportunities[1].

Looks like Google is again looking two steps ahead of everyone else, and that access to “more eyeballs” and enabling more access to more customers has significant value to Google’s business model and offers up the potential for new monetization opportunities.

Data Abundance Mentality

My continued detective work uncovered some sources that tell me that Google literally bought this business, offering a price and other incentives that AT&T (Starbucks’ previous Wi-Fi provider) could not match using traditional financial return on investment (ROI) analysis. And that’s the challenge that many traditional companies face:

The new economics of Big Data require a new approach to valuing data

Traditional companies will continue to lag in a Big Data world if they don’t discard their current “data is a cost to be minimized” mentality and adopt a “data is an asset to be gathered, nurtured, and harvested” mentality. But this will be a hard transition for many organizations raised in an era where data warehousing costs were so prohibitive that organizations learned to minimize data by keeping only 13 months of aggregated data in their data warehouse.

So upon further detective work, here exactly is what Google bought:

  • In fiscal 2013, Starbucks had more than 3 billion customer visits to [our] more than 19,000 stores in 62 countries[2]
  • While Starbucks stores currently have an average of just over 500 customers per day, that number will grow to more than 750 customers in 2020[3] (see Figure 2).
Source: Business Insider “How Many Customers Starbucks Will Have In The Future [CHART]”, Oct. 30, 2013

Source: Business Insider “How Many Customers Starbucks Will Have In The Future [CHART]”, Oct. 30, 2013

  • The average Starbucks customer visits the store six times per month. The most loyal 20% of customers visit 16 times per month[4]
  • Starbucks was targeting to grow their My Starbucks Rewards™ membership from 4.5 million active members at the end of October 2012 to approximately 9 million members by the end of fiscal 2013[5]

Adopt A Data Abundance Mentality, Or Die Hard!

Interesting that both Google (a digital media company whose only real product is packaging and selling data) and Starbucks (a brick-and-mortar company) both share one huge thing in common:  an unquenchable thirst for data.

As Joe LaCugna, director of analytics and business intelligence at Starbucks was quoted as saying:

A full quarter of Starbucks transactions are made via its popular loyalty cards, and that results in “huge amounts” of data, but the company isn’t sure what to do with it all yet.

The same goes for social media data, he said. Starbucks has a team who analyzes social data, but, “We haven’t figured out what exactly to do with it yet,” he said.[6].

Capturing huge amounts of data when Starbucks is not exactly sure what to do with the data? That’s a phrase that is unlikely uttered in the traditional data warehouse world. But if there is any phrase that summarizes the new economics of Big Data, it is:  gathering data—all of it—even when you still may not have any idea how you’re going to use it. Makes my heart sing!

Behavioral Analysis Is Like A Jigsaw Puzzle

The Starbucks deal, along with the Nest acquisition, is consistent with Google’s strategy of trying to learn everything and anything about consumers and businesses. It’s really about building out detailed behavioral models on each and every customer (and ultimately, maybe each and every human). And Google is the master of behavioral analytics.

Behavioral analytics is really like a gigantic, ever-changing jigsaw puzzle where market-leading organizations are always on the lookout for new sources of data and new insightful tidbits about their customers.

Puzzle Piece Image

Market leaders capture seemingly insignificant, disconnected tidbits of customer data (think “small data”) to glean new insight into customers and their behavioral tendencies and propensities. And it is these detailed behavioral models that enable organizations to optimize key business processes and uncover new monetization opportunities.

Note:  machines, like humans, also have behavioral tendencies and propensities. Whether you are dealing with jet engines, wind turbines, CT scanners, automobiles, computer components or pacemakers, over time machines develop different behaviors. (This has to do with variances in assembled components, maintenance activities, replacement parts, usage and wear, external weather, temperature, humidity and geographic topology conditions, etc.).

Being the master of human behavioral analytics will enable organizations to apply those same behavioral modeling and analysis techniques to the Internet of Things, an opportunity that Google obviously hasn’t missed, given their $3.2B acquisition of Nest.

My Key Detective Work Take-aways

So at the end of my detective work on this Starbucks and Google joint announcement—two masters at leveraging big data for business opportunities—here are my key take-aways regarding leading Big Data organizations :

  • They have embraced a different economic model with respect to collecting, nurturing and enhancing data; they have transitioned from a “data as a cost” mentality to a “data is an invaluable corporate asset” mentality
  • They are constantly seeking to capture new data about their customers, products, and operations even if they are not yet certain how they will use that data
  • They are constantly in search of that next nugget of data that can help them complete and update their customer (and machine) behavioral models
  • They not only think Big Data, but they also think “small data” and are constantly on the lookout for opportunities to ask that extra question of the customer that just might provide new insight into the customer’s interests, passions, affiliations, and associations

Dick Tracy I am not, but being in the Big Data business means that you need to have a detective’s curiosity about the realm of what might be possible with respect to leveraging data of all sizes and varieties for new insight into your customers, products, and operations.

 


[1] Parsing the Starbucks/Google/Level 3 WiFi Deal, Telecom Ramblings, August 4th, 2013 by Rob Powell

[2] 2013 Starbucks Annual Report

[3] How many Customers Starbucks Will Have In The Future, Business Insider, Oct. 30, 2013

[4] 6 Facts About Starbucks That Will Blow Your Mind, Motley Fool, November 24, 201

[5] Starbucks Introduces Innovative Cross-Channel, Multi-Brand Loyalty Program and Announces Global Social Impact Initiatives at Annual Meeting of Shareholders, Mar. 20, 2013

[6] http://adage.com/article/datadriven-marketing/starbucks-data-pours/240502/

Bill Schmarzo

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