Data is now part of GDP – but how do we measure its value?

As we progress further into the digital era, the way we evaluate economic growth is undergoing a significant transformation. For the first time, data is being recognised as a standalone asset in GDP calculations, akin to renewable resources like wind and wave power. This shift, prompted by updates to the United Nations’ System of National Accounts, is pivotal for accurately reflecting contemporary economic activities. 

But what does this mean in practical terms? More importantly, how do we determine the value of data?​

The Evolution of Economic Measurement

Traditionally, Gross Domestic Product (GDP) assessments have centered on tangible goods and services. While intellectual property and financial assets have been included in economic metrics, data has often remained an unquantified force driving economic changes. The UN’s initiative to incorporate data into national accounts mirrors our swiftly evolving economic landscape, where intangible assets are increasingly vital.​

By assigning value to data, nations, industries, and companies are entering a phase where they must reconsider how they measure and report economic contributions. Countries with robust digital infrastructures could witness notable enhancements in their GDP as data becomes an integral component of economic evaluations. Moreover, industries centered around data technologies - such as artificial intelligence, cloud computing, and analytics - will receive deserved acknowledgment for their economic impact.​

The Challenge of Valuing Data

Valuing data is a complex endeavor. Unlike traditional assets that may depreciate over time, data's value can increase based on its accuracy, relevance, and strategic application. Identifying appropriate valuation methods is crucial, as existing approaches may not fully capture its economic significance.​

One approach is the Sum of Costs Method, which estimates data's value based on production and maintenance expenses. While this provides a basic financial overview, it may overlook the broader economic growth potential arising from effective data utilisation. For instance, companies that leverage customer data to enhance their marketing strategies have reported increased purchases and reduced customer churn. ​

Another method is the Perpetual Inventory Method (PIM), which assesses data's value by considering historical investments over time. Although this offers insight into long-term data investment, it might not reflect the dynamic nature of data's influence on the economy.​

Despite these methodologies, accurately assessing data’s contributions remains challenging. Determining how to value data will influence its integration into GDP calculations and subsequently affect economic policy.​

The Future of Data Valuation

As organisations and governments explore optimal methods for valuing data, several critical questions arise:

• What metrics will define data's worth? 

• How can we enhance data utilisation processes across various sectors to ensure information leads to innovation and growth?​

  
  

One promising approach involves focusing on data usage outcomes. By examining results from data-driven decisions - such as productivity improvements or enhanced customer satisfaction - analysts can develop models linking data utilisation to measurable economic outcomes. For example, integrating brand and performance marketing has been shown to significantly boost return on investment (ROI) for businesses, with a balanced mix potentially increasing ROI by 25-100%. 

Equally important is the development of regulatory frameworks. As data assumes a crucial role in economic assessments, establishing standards around privacy and security becomes essential. Countries emphasising ethical data use and transparency could foster greater public trust, potentially leading to increased data utilisation rates.​

The Road Ahead

Recognising data as an economic asset signifies a substantial shift in how we evaluate and comprehend economic growth. The updates to the UN’s System of National Accounts prompt nations worldwide to reassess their operational and reporting frameworks.​

The challenge of valuing data remains intricate. Through collaboration between businesses and governments to develop innovative valuation methods, the broader implications for economic activity will significantly influence future fiscal policies.

As our economy increasingly depends on intangible assets, understanding the value of data will require continuous analysis and refinement. Bridging the gap between this emerging asset class and its economic implications will redefine fiscal reporting and pave the way for future innovations and growth in the digital age.

At Data Valuation Partners, we specialise in helping organisations understand, quantify, and defend the value of their data assets. This shift in economic measurement is just the beginning - those who can accurately measure and leverage their data will gain a decisive competitive advantage.

Read the BBC’s coverage on this shift here: https://www.bbc.co.uk/news/articles/czedpnen168o

For insights on how data valuation impacts your business, get in touch with us at Data Valuation Partners.