Many byproducts of the technological transformation we’ve seen over the past few decades have impacted the construction industry – from 3D-mapping and building information modeling to the automation of equipment and processes. However, one area which does not seem to have been fully grasped with both hands yet is the monetisation of data assets.
Recent figures supplied to Construction Global suggest that the industry for construction data, valuable to Wall Street and the markets, could grow to somewhere between $20mn and $50mn over the next five years.
At least $5mn of growth is expected over the next two years alone and Tammer Kamel, CEO and founder of Quandl, a company which specialises in the monetisation of data, is adamant that there is money to be made by construction companies, and firms in markets connected to the industry.
“There’s a big opportunity here,” says Kamel. “There’s money on the table that could be taken by construction companies.
“It’s relatively low-hanging fruit; the data is sitting in their database. They just have to make the small investment involved in turning it into a product; there’s a nice healthy revenue stream to be had.
“Of course, it would depend on the company and its particular line of business. If they’re a lumber company, say, then they’re going to have a very good sense of demand for lumber. They’re going to have that information implicitly because of what they do, but that could turn out to be something that a professional investor could turn into a trading strategy.
“This is a big thing – data commercialisation – and outside the construction industry, lots of companies are doing this and making lots of money. I think it’s an opportunity that construction companies should be looking at. It’s an under-tapped market.”
Kamel is a former quantitative analyst who has spent his entire career in the finance industry, and he says Quandl was borne out of his own frustrations with the tools that fed data to practitioners like himself.
Identifying valuable assets
The computer engineering graduate has examined closely the potential for companies in and around the construction industry to make money from their data assets, and says that there are two main ways that construction insights can be interesting to Wall Street.
Kamel says: “One is in a macro-economic sense and one is in a company-specific sense.
“In the macro-economic sense, construction activity is a critical part of the economy of any region, whether a specific country or globally, and it’s a substantial component of global GDP.
“What’s happening day-to-day, week-to-week, month-to-month, year-to-year is extremely pertinent to any investor who uses macro-economic information to colour their investment decisions.
“In the hedge fund industry, where we sell most of our data, there’s an entire subset of hedge funds called global macro funds which take investment decisions solely on the basis of macro-economic information.
“For construction activity, they tend to use information which gets published, usually from governments and public bodies, but what’s interesting there is that that the data tends to be very stale, usually coming out two or three months after the fact.
“So, if you can start knowing information about construction activity much closer to real-time, it empowers you to get ahead of the market.
“The rest of the market will learn what happens three months from now, so if you can know what’s happening now or with a two or three-week lag, it empowers you to know things that others won’t be aware of for a month or two and take investment decisions in advance.
“The other way that construction data is leveraged on Wall Street is in a company-specific way.
“There are all kinds of companies whose profits and revenue are a function of construction activity – maybe it’s a lumber or an iron ore company, or a business that builds houses. All of these companies are going to be sensitive to construction activity.
“You can learn all kinds of important things about any specific company if you have good insights about what’s going on in construction.
“Those are the two ways that the data gets leveraged by professional investors.”
But what kind of data is it that they’re interested in?
Kamel details to Construction Global how it’s very much a case of quality over quantity. In fact, some datasets literally offer just one number a day, but the number is so advantageous to certain investors that they’ll pay a lot of money for it.
“We have a dataset which estimates how many cars Tesla is selling on a daily basis,” he explains.
“Tesla is a hot stock and they are famously opaque in terms of information they release to the market, so all of the investors in Tesla are, to a large extent, flying blind. But with this dataset we are able to report to them: ‘Hey, Tesla sold this many cars today,’ which is gold for them because otherwise they wouldn’t know. There’s no other way of knowing.
“So that’s an example of just one number and it’s worth a lot of money to these investors.”
And Kamel reckons that same rule of thumb is applicable to the construction industry and the companies involved within it.
“We have customers who lust for construction insights,” he continues. “They call us looking for new kinds of information about the construction industry and the state of the construction industry, because it’s so important to the economy and the health of so many companies in that sector.
“If you’re talking about a lumber company, again, with access to certain data, investors might detect, for example, a sudden spike or a trend upwards in lumber orders compared to last year. Well, that’s the kind of early warning the construction industry is picking up momentum with, which would allow an investor to pre-position in a certain way as they’re seeing this trend before the rest of the market. Then they can profit from it.”
Building profits from data
A company like Quandl takes away the stress for clients who wish to monetise data, but Kamel does say that it is possible, with some investment, for a firm to put together a team which allows it do so internally. The process involves firstly identifying whether the data provides any new insight to the market, and then organising it in a way that is useful to Wall Street.
After that, some technical expertise is required to put the data into a database where it can be accessed, overcoming any computer science problems. Then, a company must ensure that data is legally compliant with strict Wall Street guidelines, before some sort of sales and marketing mechanism is put in place to ensure that the data reaches the right people who are willing to pay for it.
Kamel is sure, though, that it’s worth looking into for any company in or around the construction industry, which may consider itself to have a potential data asset.
He adds: “In the last 12 months it’s exploded, it’s become the hottest topic on Wall Street. It’s all about predicting the market. The only way you make money is if you can predict which stocks to buy or why commodity prices are going up and down. It’s unbelievably difficult to do so consistently. And the beauty for companies is that it’s revenue which drops right onto the bottom line. You have the data just sitting there in the database and there is very little marginal cost to doing it. If you can take a dataset and turn it into a couple of million dollars by partnering with a firm like Quandl, then it’s great because it’s instant profit. There’s no cost, no additional infrastructure or personnel needed, so the attraction, and this goes beyond the construction industry, is because it’s an easily monetisable asset that can just be translated straight into profit.”