If data is the new oil it makes sense for market makers to set a price. But the existing market is horribly rigged. Those acquiring data, including governments and tech giants, pay next to nothing. Suppliers give it away gratis. China’s new data exchange, launched with minimal fanfare in Shanghai, is attempting to change this dynamic.
Past attempts to create a market in data have had little success. Pre-internet shopping catalogues and supermarkets running loyalty cards gathered information on shoppers but lacked the means to analyse it in detail before selling it on to third parties.
The volume of data created complicates the issue. Oil comes in a few easy to categorise varieties, data do not. Crude data, neither aggregated nor in a readable form, are of limited use.
US data storage company Seagate, which has shipped three zettabytes and counting of storage, reckons there will be 175 zettabytes of data by 2025. That is three times last year’s 59 zettabyte tally. One zettabyte is 8,000,000,000,000,000,000,000 bits, each of which is just 10-30 nanometres (billionths of a metre) wide on storage media. This resides in servers and devices across the globe, governed by a patchwork of rules and regulations aimed, in part, at protecting consumers. Some jurisdictions require it to be held onshore, for example.
None of this is conducive to market making. The newly minted Shanghai Data Exchange is long on ambition. It seeks to resolve knotty issues of pricing, determining rights and supervision. Yet it launched with fewer than two dozen products from mostly state-owned companies. Transactions, at least initially, will be one-on-one.
Creating order and forming a marketplace for data is logical considering the world has done the same for pork belly, tulip bulbs and cryptocurrencies. But broader scope is required. Not only are products on the Shanghai Data Exchange limited, there are multiple restrictions. Buyers will need to explain how they intend to use the data they buy. China’s data market looks more like oversight than the beginning of free market enterprise.