Business Models That Take Advantage of Open Data Opportunities

Mark Boyd at the Programmeableweb: “At last week’s OKFestival in Berlin, Kat Borlongan and Chloé Bonnet from Parisian open data startup Five By Five moderated an interactive speed-geek session to examine how startups are building viability using open data and open data APIs. The picture that emerged revealed a variety of composite approaches being used, with all those presenting having just one thing in common: a commitment to fostering ecosystems that will allow other startups to build alongside them.

The OKFestival—hosted by the Open Knowledge Foundation—brought together more than 1,000 participants from around the globe working on various aspects of the open data agenda: the use of corporate data, open science research, government open data and crowdsourced data projects.

In a session held on the first day of the event, Borlongan facilitated an interactive workshop to help would-be entrepreneurs understand how startups are building business models that take advantage of open data opportunities to create sustainable, employment-generating businesses.

Citing research from the McKinsey Institute that calculates the value of open data to be worth $3 trillion globally, Borlongan said: “So the understanding of the open data process is usually: We throw open data over the wall, then we hold a hackathon, and then people will start making products off it, and then we make the $3 trillion.”

Borlongan argued that it is actually a “blurry identity to be an open data startup” and encouraged participants to unpack, with each of the startups presenting exactly how income can be generated and a viable business built in this space.

Jeni Tennison, from the U.K.’s Open Data Institute (which supports 15 businesses in its Startup Programme) categorizes two types of business models:

  1. Businesses that publish (but do not sell) open data.
  2. Businesses built on top of using open data.

Businesses That Publish but Do Not Sell Open Data

At the Open Data Institute, Tennison is investigating the possibility of an open address database that would provide street address data for every property in the U.K. She describes three types of business models that could be created by projects that generated and published such data:

Freemium: In this model, the bulk data of open addresses could be made available freely, “but if you want an API service, then you would pay for it.” Tennison pointed to lots of opportunities also to degrade the freemium-level data—for example, having it available in bulk but not at a particularly granular level (unless you pay for it), or by provisioning reuse on a share-only basis, but you would pay if you wanted the data for corporate use cases (similar to how OpenCorporates sells access to its data).

Cross-subsidy: In this approach, the data would be available, and the opportunities to generate income would come from providing extra services, like consultancy or white labeling data services alongside publishing the open data.

Network: In this business model, value is created by generating a network effect around the core business interest, which may not be the open data itself. As an example, Tennison suggested that if a post office or delivery company were to create the open address database, it might be interested in encouraging private citizens to collaboratively maintain or crowdsource the quality of the data. The revenue generated by this open data would then come from reductions in the cost of delivery services as the data improved accuracy.

Businesses Built on Top of Open Data

Six startups working in unique ways to make use of available open data also presented their business models to OKFestival attendees: Development Seed, Mapbox, OpenDataSoft, Enigma.io, Open Bank API, and Snips.

Startup: Development Seed

What it does: Builds solutions for development, public health and citizen democracy challenges by creating open source tools and utilizing open data.

Open data API focus: Regularly uses open data APIs in its projects. For example, it worked with the World Bank to create a data visualization website built on top of the World Bank API.

Type of business model: Consultancy, but it has also created new businesses out of the products developed as part of its work, most notably Mapbox (see below).

Startup: Enigma.io

What it does: Open data platform with advanced discovery and search functions.

Open data API focus: Provides the Enigma API to allow programmatic access to all data sets and some analytics from the Enigma platform.

Type of business model: SaaS including a freemium plan with no degradation of data and with access to API calls; some venture funding; some contracting services to particular enterprises; creating new products in Enigma Labs for potential later sale.

Startup: Mapbox

What it does: Enables users to design and publish maps based on crowdsourced OpenStreetMap data.

Open data API focus: Uses OpenStreetMap APIs to draw data into its map-creation interface; provides the Mapbox API to allow programmatic creation of maps using Mapbox web services.

Type of business model: SaaS including freemium plan; some tailored contracts for big map users such as Foursquare and Evernote.

Startup: Open Bank Project

What it does: Creates an open source API for use by banks.

Open data API focus: Its core product is to build an API so that banks can use a standard, open source API tool when creating applications and web services for their clients.

Type of business model: Contract license with tiered SLAs depending on the number of applications built using the API; IT consultancy projects.

Startup: OpenDataSoft

What it does: Provides an open data publishing platform so that cities, governments, utilities and companies can publish their own data portal for internal and public use.

Open data API focus: It’s able to route data sources into the portal from a publisher’s APIs; provides automatic API-creation tools so that any data set uploaded to the portal is then available as an API.

Type of business model: SaaS model with freemium plan, pricing by number of data sets published and number of API calls made against the data, with free access for academic and civic initiatives.

Startup: Snips

What it does: Predictive modeling for smart cities.

Open data API focus: Channels some open and client proprietary data into its modeling algorithm calculations via API; provides a predictive modeling API for clients’ use to programmatically generate solutions based on their data.

Type of business model: Creating one B2C app product for sale as a revenue-generation product; individual contracts with cities and companies to solve particular pain points, such as using predictive modeling to help a post office company better manage staff rosters (matched to sales needs) and a consultancy project to create a visualization mapping tool that can predict the risk of car accidents for a city….”

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