A Primer on “Alternative Data” and Why It Matters
Over the last ten years, the rise of the big data movement has put a spotlight on the competitive advantage that data can provide to businesses. As a result, every company is in some way a data company. If you need proof of that fact, just look at the recent headlines about Roomba.
Smart companies use their data to make informed decisions. Even smarter companies pair their data with outside sources to strengthen their process. Outside data could be anything from third-party reports, data from partners or vendors, or even a nontraditional source of data known as an alternative data source.
An alternative data source refers to data that is either generated by a nontraditional means or that was created for one purpose but found to be useful in another application. It could be anything from using satellite imagery of a parking lot to identify retail traffic to employing clickstream data to predict a company’s revenue. Regardless of what type of data it might be, more and more companies are now considering or even already using alternative data to make better, more informed decisions.
Here are a few insights that alternative data sets can reveal:
- While Amazon and Walmart.com have comparable rates for overall apparel purchasers at 17.5 percent and 13.7 percent respectively, Amazon’s overall conversion rate is significantly higher at 25.6 percent versus Walmart.com’s 3 percent.
- Leading up to the 2016 election, Facebook referrals accounted for 50 percent of traffic to fake news sites and 20 percent of traffic to reputable news sites.
- The Alex Jones Channel is the leading conservative media channel on YouTube, and sees 60 percent more traffic than Fox News’ YouTube channel.
- Millennials prefer watching late night clips on YouTube rather than on network channels.The demographic most coveted by marketers stream Jimmy Kimmel (61 percent) and Conan O’Brien (65 percent) more than other late night hosts.
Alternative data may sound complex or seem difficult to obtain, but the reality is that there are more reliable sources available today than ever before. That matters because it can provide a real competitive edge to an organization, from a hedge fund looking to invest in a new market to a retailer working to capture market share. Alternative data is the Swiss Army Knife in any decision-maker’s back pocket, and can’t be underestimated.