What does "Customer Is The Product" actually mean?

This phrase refers to business models where companies offer free services to users, but make money by collecting data about those users and selling targeted advertising. Instead of you paying for the product with money, you're "paying" with your attention and information, which the company then monetizes by selling to advertisers. Companies like Meta (Facebook) and Google exemplify this model.

How do these companies make money if their services are free?

These companies generate revenue primarily through targeted advertising. They collect vast amounts of data about user behaviors, preferences, and demographics, which allows them to offer advertisers incredibly precise audience targeting. This makes their ad space more valuable than traditional advertising channels. Some also sell data insights or offer premium subscriptions as additional revenue streams.

What is programmatic advertising?

Programmatic advertising is the automated buying and selling of digital ad space in real-time. It uses artificial intelligence and algorithms to purchase ad impressions based on specific target audiences. Companies like The Trade Desk (TTD) and Magnite (MGNI) operate platforms that facilitate this process, connecting advertisers with publishers and optimizing ad placement based on user data.

How does AI impact these data-focused companies?

AI significantly enhances these companies' ability to analyze user data and deliver more effective advertising. It helps them identify patterns in massive datasets, predict user behavior, and optimize ad targeting with previously impossible precision. As AI technology advances, these companies can extract even more value from their user data, potentially increasing their profitability and competitive advantage.

What risks do these data-monetization companies face?

The main risks include regulatory changes around privacy and data collection, shifts in user attitudes about data sharing, platform or browser restrictions on tracking, and competition for digital ad dollars. Privacy legislation like GDPR in Europe and CCPA in California has already impacted how these companies can collect and use data. Additionally, they face the constant challenge of maintaining user engagement, as their business model depends on continuing to attract and retain active users.

15 handpicked stocks

Customer Is The Product

Welcome to a carefully curated collection of companies that have mastered the modern paradox: offering "free" services while generating massive revenue from user data. These stocks, selected by our expert analysts, represent the gatekeepers of digital advertising who've turned your information into their business.

Han Tan | Market Analyst

Updated 2 days ago | Published at juin 17