MOTOR Magazine

A MOTOR Magazine Newsletter
July 26, 2016

Contributed by Bob Chabot
Zero Dollar Cars: Closer Than You Think?

Tech giants seek to access and monetize vehicle metadata

Automakers are increasingly connecting their new car models to meet growing consumer demand for in-car technology. But automakers aren't the only players seeking opportunities in the connected car market.

Technology industry giants — such as Amazon, Apple, Google, Facebook and many others — have begun to view and monetize opportunities to use data provided by automobiles and occupants. They even suggest the "zero dollar car" is at hand.

"User data mined from vehicles — based on location, intentions and preferences — is gold to marketers and money to anyone that can harvest, analyze and process it," stated John Ellis, founder and managing director of automotive consultant Ellis & Associates. "That's driving tech giants into the auto industry. They're here to stay, and are better than automakers at converting data into profits."

Ellis, formerly Ford Motor Co.'s global technology officer and head of its developer program, was the keynote speaker at the Equipment and Tool Institute's ToolTech 2016 event. Following his presentation, The Zero Dollar Car: Why Tech Companies are Focusing on the Auto Industry, MOTOR visited with Ellis to discuss the insights he shared and other impacts he envisioned.

"The tech giants have a proven history at successfully accessing, analyzing and repackaging metadata for resale in other industries," Ellis explained. "They not only see automobiles as opportunities that can be exploited for profit, they are also more capable of doing so today than the automakers are." (All images — Ellis & Associates)

What is Your Personal Data Worth?
Back in the 1990s, automakers controlled access to onboard vehicle software and data — not tech companies, researchers, consumers or others. That's no longer the case, due to federal and state legislation, U.S. Copyright Office rulings and other drivers.

"Automakers continue to keep trying to control the wealth of data that vehicles can generate, but it's likely already too late," Ellis noted. "Tech giants now see connected cars as a new opportunity to extend the reach of their mobile operating systems to mine and monetize data. That has the automakers scared."

"While automakers are slowly responding to the threat tech giants pose in the marketplace, for the most part, their actions to date have been fractured, small in scope and in no way, shape or form meeting the challenge. In part, this is because the entrenched culture of automakers gets in the way."

He cited several examples of how automakers need to reshape their corporate cultures to compete with the tech giants:

  • Automakers are proprietary, with a history of a "one solution, one brand" approach. Tech companies prefer a "one solution, multiple brands" approach. Case-in-point: Early center console systems (e.g. OnStar, mBrace, Sync, and others) were proprietary, functioned poorly and were limited in capacity. Nearly all automakers have since transitioned to the tech industry's solutions, using Apple Carplay or Google Android as the backbone.
  • Automakers' actions with respect to data have continued to be piecemeal and generally focused on the initial vehicle owner, rather than multiple owners over the life of the vehicle. The tech industry's focus is on many individuals and the sources for data they provide over time, including from vehicles.
  • Automakers have historically followed a 'ship and forget' approach focused on individual vehicles. They build the car, sell the car, then forget about the car and customer, if not immediately, then when the warranty period ends. The tech giants follow a "ship and remember" approach, staying in contact with customers on a day-to-day basis even after they've bought a product or service. Why? Tech companies have learned regular, ongoing contact is the best way to keep customers loyal and convert their wallets into revenue over time, without disruption or losing business to a competitor.
  • Automakers are consumed with gaining control of access to vehicle software, data and information. Tech companies are focused on accessing, monitoring and converting those resources— into dollars.
  • Automakers have difficult thinking outside the box. Tech firms, however, have a history of doing so; they're also more experienced and adept at monetizing deep-dive, data-driven opportunities.

"The Extended Vehicle concept (ExVe) could be a game changer for automakers, to the detriment of technology companies and the automotive aftermarket. ExVe (right) is a new proposed vehicle communications interface — supported by the International Standards Organization (ISO and several automakers — that is scheduled for adoption in late 2017. As currently written, ExVe would put control of access to vehicle data, information and software in the hands of automakers. (Image — Daimler AG)

[Editor's note: MOTOR will cover ExVe in detail in an upcoming newsletter.]

What if Automakers Thought Like Tech Companies?
"Make no mistake: Vehicles, drivers and occupants are captive audiences for the tech giants," advised Ellis. "You and other individuals are optimal targets to the companies that know how to track, harvest, analyze, process and manage data — from your phones, other smart devices and now, the vehicles you drive and ride in. They're just following the money from personal devices to vehicles."

So what are the tech giants actually doing and what does it mean? "Apple, Google and other tech companies don't just sell products," Ellis emphasized. "They sell ecosystems — collections of services (e.g. browsing, mapping, infotainment, shopping, telephony, etc.) that consumers can choose in exchange for allowing access to their data.

Huge potential revenues are at stake. According to Ellis, Google tracks more than 25 percent of the websites individuals visit, while Facebook tracks 85 percent of them. In addition, Google Analytics or Facebook Likes enables data to be tracked and collated. Furthermore, GPS and other software are employed by these and other tech giants to track where one drives to, and what business one actually enters.

In 2014, the last full year that revenues are available, Google alone earned an estimated $5,500 per smart device from packaging and reselling data. That's before it began tracking vehicle-derived data.

"Don't think it's just Google and Facebook that have 'cracked' how to earn revenues from data collected from vehicles and elsewhere," he cautioned. "All the tech giants — Alibaba, Amazon and others — are now actively developing ways to grow their revenues too. In contrast, automakers lag behind the tech industry in recognizing how to leverage the opportunities, behavioral nuances and modern marketing strategies pertaining to the technologies that consumers demand in vehicles and other products."

"Data in vehicles today — not just direct vehicle data, but also what's said, listened to, searched for, etc. — can provide valuable insights to marketers," noted Ellis. "For example, the image above represents just what was said in a vehicle and captured by a built-in microphone over a 30 day period."

"Based upon 'Bayesian Inference' principles, the color sixe of each word indicates how frequently and how much the topic was discussed. The larger and more green, the more frequent and dominant the topic was; the smaller and more red, the less frequent and dominant the topic was. Tech companies view this type of raw data as opportunities that can be exploited." (Image — Ellis & Associates)

Accessing Metadata is Easy; Monetizing it is the Trick
"Packaging and selling sensor and ecosystem packages represents a huge opportunity," suggested Ellis. "The technology already exists to harvest data from hardware and ecosystems — vehicle and personal devices — which could then be packaged and sold to interested parties for a substantial fee. When negotiating the final price of a new vehicle, the buyer could select certain data packages as options. In return for selling access to those options, the buyer would be compensated by a substantial price discount derived from the much larger revenues garnered by selling the big data to interested business and other parties. Direct subsidies to car owners is another alternative. Both effectively reduce the bottom line price of a new vehicle."

"The key is tracking and packaging data others want and are willing to pay for. For instance, today's vehicles have a wide range of sensors and other hardware gathering data that can be leveraged into sales by savvy marketers. Likewise, the ecosystems that vehicles and occupants connect to have similar appeal. But know this: The technology already exists to harvest data from onboard hardware devices and ecosystems, organize it and then sell it to interested parties. Vehicles and occupants would provide hundreds of millions of unique, distinct data collection points to use this technology."

Ellis provided many examples of data package options during his presentation that each have a market hungry for relevant data. These included:

  • Weather — Combining data from traction control, headlights, clock, wiper, barometer, GPS and other relevant sensors would provide a pretty good idea of the weather the vehicle was in anywhere, anytime. The weather data could then be sold to National Oceanic and Atmospheric Administration (ironically, a division of the U.S. Department of Commerce) and insurance firms to enable earlier warnings and preparations that could reduce the financial damage from a hurricane or other disaster. The savings could easily be in the billions, more than enough to pay for the data.
  • Traffic — Data collected from wheel speed, rear object detection and front object detection sensors will allow drivers, emergency services, transportation authorities and other recipients to determine where, when and how to avoid congested traffic.
  • Diagnostics — Data harvested from vehicle diagnostic and health sensors would be of value to those who service and repair cars, parts providers and others in the aftermarket.
  • Ecosystems — What is said listened to or searched for inside vehicles today, once organized and packaged together is high value data to both individual businesses and brands. Data collected from ecosystems could also provide marketers with valuable information they would be willing to pay handsomely for. For instance, consider a "telephony' package (based on data collected from microphones, infotainment consoles, browsers, GPS, games and phones).

Just as there are innumerable applications for your computer, there are countless options that could be designed — each with an individual financial value. The discounts received by the vehicle buyer would substantially reduce the final price of the vehicle, conceivable to net zero.

"Automakers cannot do this today," Ellis concluded. "However, the tech giants can. In fact they already do so. It's their job, they do it every day, and they do it across many industries. Knowing that, automakers may want to partner with tech companies in developing a mutually beneficial solution, much like they did earlier with center consoles."

"Otherwise they face the prospect of tech companies doing so without them. Realize that tech firms are preparing to do just that, for they are capable of outright buying access to big data from vehicles owners directly, for a fraction of the revenue it represents to them. Just consider the Google Car and the rumored Apple Car for a moment. Zero dollar cars could be much closer than you or the automakers think."

[Editor's note: Looking for the latest diagnostic and automotive service insights? Read MOTOR Magazine's July 2016 issue.]

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