Abstract/Description

Data is widely regarded as the most valuable resource in today’s economy, yet its value often eludes precise quantification. This paper examines customer data as an intangible capital asset and addresses the challenge of measuring its impact. A novel database was created by merging Compustat with online clickstream data capturing the activity of approximately 200 million users, providing proxies for data inflow based on visit metrics. The analysis documents that the distribution of firms’ customer data stocks follows a rightskewed log-normal pattern with a fat tail. Additionally, a positive relationship emerges between sales and data inflow, data stock, profit, and productivity. Drawing on these findings, a theory of customer data is developed in which monopolistic firms operate three interconnected departments: a Dixit-Stiglitz production department, a sales department that collects customer data as a byproduct, and a data department that invests in software to extract taste predictions from data. The model demonstrates that firms with substantial data stocks tend to exhibit lower labor shares and face inequitable antitrust scrutiny. The COVID-19 pandemic lockdown serves as a natural experiment to identify the model, revealing that, in the retail sector, slightly more than one-third of a firm’s profit can be attributed to its stock of customer data.

Keywords

Customer Data, Intangible Capital, Clickstream Data, E-commerce, Labor Share, Antitrust

JEL Codes

E22; E23; E25; K21; M20

Location

S2 room, Adamjee building

Session Theme

Digital Transformation: Insights from Complex Economic Data

Session Type

Parallel Technical Session

Session Chair

Hadia Majid, Lahore University of Management Sciences

Session Discussant

Wali Ullah, Institute of Business Administration ; Zehra Aftab, Prince Muhammad University

Start Date

9-12-2024 2:30 PM

End Date

9-12-2024 4:30 PM

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Dec 9th, 2:30 PM Dec 9th, 4:30 PM

Customer Data and the Digital Age

S2 room, Adamjee building

Data is widely regarded as the most valuable resource in today’s economy, yet its value often eludes precise quantification. This paper examines customer data as an intangible capital asset and addresses the challenge of measuring its impact. A novel database was created by merging Compustat with online clickstream data capturing the activity of approximately 200 million users, providing proxies for data inflow based on visit metrics. The analysis documents that the distribution of firms’ customer data stocks follows a rightskewed log-normal pattern with a fat tail. Additionally, a positive relationship emerges between sales and data inflow, data stock, profit, and productivity. Drawing on these findings, a theory of customer data is developed in which monopolistic firms operate three interconnected departments: a Dixit-Stiglitz production department, a sales department that collects customer data as a byproduct, and a data department that invests in software to extract taste predictions from data. The model demonstrates that firms with substantial data stocks tend to exhibit lower labor shares and face inequitable antitrust scrutiny. The COVID-19 pandemic lockdown serves as a natural experiment to identify the model, revealing that, in the retail sector, slightly more than one-third of a firm’s profit can be attributed to its stock of customer data.