Big Data Big Analytics

McKinsey Study: Location, Location, Location, Part 1

December 6, 2011 at 7:38 pm Mary Ludloff 3 comments

By Mary Ludloff

Yes, it’s that time again: a deep drill-down into a specific big data area, courtesy of McKinsey’s voluminous report on “Big data: The next frontier for innovation, competition, and productivity.” You may be wondering about the five month delay since my last foray into this particular study but, well, we have been just a bit busy with our book (Privacy and Big Data) while working on some very cool features for our Analytics Platform as well as handling all our other PatternBuilders responsibilities!

I also must confess to a bit of angst regarding location data, especially when it pertains to where we are located as opposed to where things (like shipping boxes) are located. From a privacy standpoint, this is a rather large (okay, huge) area of concern but it’s not the data itself that we should be worried about. As in most things surrounding the privacy debate, it is how the myriad of companies, organizations, and government agencies collect and use our personal location information without our knowledge or consent that we should be worried about.

With that in mind, let’s set aside the privacy implications for a moment and simply consider how personal location data will create new businesses and business models across the globe. According to McKinsey:

“Unlike other domains that we have examined, new pools of personal location data are not confined to a single sector but rather cut across many industries, including telecom, retail, and media. This domain offers the potential for huge new value creation over the next ten years that we estimate at more than $100 billion in revenue to service providers and as much as $700 billion in value to consumer and business end users.”

No matter how you cut it, that’s a lot of value!

What the heck is personal location data anyway? I am so glad you asked because it is much more than just the GPS chip in your smartphone! McKinsey defines personal location data as data that accurately pinpoints (within a few city blocks but often far more accurately) where a person, or the device that they are carrying, is located in real time. There are three primary types of location data:

• Data generated via the GPS chip (of course) in your mobile device, but not limited to your phone (for example, a personal navigation system).
• Cell tower triangulation data that can be found on your mobile device (remember the iPhone location tracking kerfuffle?) and of course, kept by your mobile providers for some period of time.
• In-person credit and debit card transactions (huh?).

Now, you may not realize this but your credit and debit cards were early sources of location data. When your card was swiped at a point-of-sale (POS) terminal, information about you was linked to that location and that specific transaction. In fact, in 2008 there more than 90 billion transactions that were linked to POS terminals and law enforcement would use this kind of data to establish a physical location (and yes, law enforcement and other agencies have become far more sophisticated in location tracking in a very short amount of time—3 years—but I digress).

Of course, as the number of mobile phones has increased (5 billion globally and counting) the ability to locate “you” via cell-tower signals (they are used to triangulate your location) is also on the rise. And then there’s the smartphone (a subcategory of mobile phones): in 2010, about 600 million devices in use and projected to grow by 20% each year. In addition to GPS, most smartphones have Wi-Fi capability which is yet another source of location data. There are also services, like Skyhook, that map the physical location of Wi-Fi networks making location data more available and more accurate. There are even solutions, like shopkick , Path Intelligence, and even the latest release of Google Maps that determine your location within a building, malls, or amusement parks.  (Just a note: you may remember that technology from Path Intelligence was due to debut in two U.S. malls recently but was cancelled due to privacy issues.)  Naturally, all of this “stuff” generates lots of data:

• The GPS chips in your personal devices generates large volumes of location data because they are frequently updated (as you move around).
• Cell towers generate high volumes of location data because of the ever increasing cell phone users (whose location is tracked via the towers).
• Smartphones also generate a great deal of location data because many of their applications require that your location is tracked. (Just think about all those handy dandy apps you use on your phone that give you directions or tell you what restaurants, stores, etc., are nearby.)

How much data are we talking about? In 2009, approximately 1 petabyte, increasing by about 20% per year. Comparatively speaking, this is small potatoes (it’s still big but just not as big as) when compared to health care data (see my list of McKinsey posts at the end of this blog, two of which tackle the health care industry for more information). Why? Well, location data requires just a few bytes to capture while health care data includes video (and other types) which can run into megabytes. Here’s the good news: location data generates a much higher value per byte.

And where is all this data coming from? Primarily Asia as it has the most mobile phones in use. In fact, the top three sources of location data are:

• China, at an estimated 800 million phones in 2010.
• India, with more than 650 million phones in use.
• North America, with more than 300 million phones.

Whew. Lots of data covering the entire globe that can be used by multiple industries for multiple business models: Is it any wonder that it could represent $800 billion in value? I will break this down for you in my next post. The top money maker may surprise you (I certainly was) but it makes perfect sense when you think about it (yes, this is a teaser).

Now for those of you who may not have read my previous McKinsey posts, here’s the list:

• McKinsey Study: Some Great Stats to Chew On
• McKinsey Study: Big Data & Analytics, Talent, and the Brand
• The McKinsey Study and the U.S. Health Care System: First, the Bad News…
• The McKinsey Study and U.S. Health Care System: Now for Some Good News…

Check back next week for Part 2!

Entry filed under: General Analytics. Tags: analytics, big data, Google, PatternBuilders Analytic Framework, Smartphone.