Due to the heterogeneity of data, data valuation is very challenging in practice. Therefore, it is important to understand the basic characteristics of digital business models before making an assessment:
- Direct network effects
In digital business models, the utility value of a digital good often depends on the number of other people or machines using a service. For example, social networks do not create value for users unless other participants interact with them. Economically, such networks generate positive externalities (spill-over effects). In these, the sum of all value added contributions of the individual network participants is smaller than the total value added generated by the network (so-called super additivity of value added contributions). From an economic point of view, a network is therefore extraordinary, since the marginal utility increases rather than decreases as usual as the volume increases.
- Indirect network effects
It is also possible that the benefit is not directly dependent on a digital good. This is the case, for example, with a price comparison search engine for rental cars, which in turn refers to another digital platform for booking rental cars.
- Scaling options
Digital goods have a high proportion of fixed costs and a low proportion of variable costs. The effective marginal costs of software or e-books, for example, are close to zero. Once created, they can be sold without a physical presence.
- Change costs and lock-in effects
The accumulation of data by one supplier may inhibit customers of a digital good or prevent them from switching to another supplier. The costs can be both monetary and psychological.
- Complementary goods
Digital goods and services complement each other. Several digital goods, such as apps that complement the operating system of a smartphone, create added value for the user.