Barron’s cover story, “The Boom in Big Data” on December 3rd highlighted the rise of alternative data sources as investment tools. Alternative data sources might include website traffic, location data, social media sentiment or credit card data, among other 3rd party data and information. These “tools” are becoming more popular among investors to spot trends and optimal buying (or selling) opportunities. Buyers across multiple industries have been making decisions based on 3rd party datasources for years. Advertisers and marketers consult 3rd party data providers such as Nielsen or ComScore while financial services companies make lending decisions based on data from 3rd party credit bureaus, such as Experian or TransUnion. It’s not surprising than that investors would consult 3rd party or alternative data providers before making buying decisions too. In an increasingly digital world, the sheer volume of data is growing along with the number of companies working to productize and make a business out of selling alternative data. All of the alternative data providers mentioned in Barron’s cover story were founded within the last 10 years and many have recently closed additional funding. They are gaining traction among their customers as well. Investors’ spending on alternative data has increased 76% in the last year with an average spend of nearly one million dollars per year, according to a 2018 Greenwich Associates survey. Businesses, such as retailers are also leveraging alternative data before investing in future store locations. It’s likely that other key stakeholders, such as strategic partners, customers, or even prospective employees will soon consult 3rd party or alternative data sources before making important decisions too. As alternative data sources become commonplace, communications teams need to have a strategy to address their findings.
First, be proactive:
- Identify alternative data sources that can be used or are currently used to gather information about your company, customers and competitors.
- Understand how alternative data compares, correlates or differs from your own data.
- Establish what information key constituents need but aren’t getting from you.
Second, identify key metrics:
- Determine if you can adopt 3rd party or alternative data and integrate it within your communications. If your industry has settled on a standard measurement, such as Nielsen or ComScore, it’s imperative to work closely with the data provider to correct any errors, proactively communicate findings together, and speak the same industry language.
- Be creative. Every company is unique, and key metrics used to measure a business should be too. While an industry may have standardized on a set of key metrics such as daily or monthly active users (DAUs or MAUS, respectively), consider them as guide posts and don’t rule out key metrics that are based on subsets or subsegments of standard key metrics.
- Note that key metrics are different than financial metrics. What’s reflected on the income, balance sheet or cash flow statements doesn’t always tell the full story of how a business is progressing towards its goals.
Third, develop a communications plan:
- Integrate key metrics and other data into your communications as part of your communications style. This may include presentations, press releases, earnings scripts and other corporate communications.
- Determine optimal timing. Some metrics may be disclosed annually or quarterly, while others referenced from time to time. Ideally, the timing should be proactive and based on a predetermined schedule, rather than reacting to news or the data provider’s schedule.
- Anticipate questions that will arise from alternative or 3rd party data sources.
Key metrics demonstrate an intimate knowledge of a business. They serve as a helpful guide for investors, analysts and strategic partners to understand how a company is progressing towards its goals and that the company’s strategy is working. More broadly, identifying new and unique key metrics and data can help a company create a thought leadership position within an its industry.
It’s critical to have a communications strategy that includes key metrics and addresses 3rd party data and alternative information, because if you don’t use data and key metrics to tell your story, others will.