Alternative data is gaining favour among investment firms seeking new ways to find alpha, but its lack of maturity as a data type is also leading to a dichotomy in the market between providers and buyers. While more than 90% of data providers expect prices to increase or remain the same through 2019, nearly 60% of data buyers say datasets are overpriced. Similarly, the top three categories of data covered by providers are business insights, web traffic, and sentiment. Buyers view the three most valuable data categories as credit and debit cards, web data, and social and sentiment data.
These statistics are drawn from a report by BattleFin and AlternativeData.org – State of the Alternative Data Market 2019 – Pricing Survey Report. The report assesses alternative data pricing, dataset testing and purchasing, sales and marketing, and product development based on a survey carried out by BattleFin in 2018 among 173 respondents, 69 of which were alternative data buyers and 104 data providers.
Other headline statistics show a rise in alternative data budgets, with 20% of respondents having a budget of over $1 million in 2018 and 30% in 2019, although the majority continue to have a very small or zero budget. The most buyers, 42%, suggest the average annual price of an alternative dataset they look at is between $50 and $120,000 and that they expect to test and evaluate 10 or fewer datasets in 2019. Some 80% expect to buy a minimum of one to five datasets in 2019.
From the providers’ perspective, the good news in 2019 is that more data buyers are entering the market with budget and most buyers are expected to renew contracts for existing alternative data services. The pain points are sales cycles of about seven months, a lack of data-testing resources at buyers and locating a decision maker for alternative data sales. Privacy laws and market movements are expected to have the greatest impact on the alternative data market through 2019.