CKGSB professor quantifies the value of personal data in e-commerce

BEIJING, July 5, 2024 /PRNewswire/ — In a world where e-commerce platforms offer consumers an overwhelming range of products, data assets are the linchpin of digital platform operations as data-driven algorithm recommendations help users discover and purchase their desired items. But what would happen if these recommendations were turned off?

Sun Tianshu, CKGSB Dean’s Distinguished Chair Professor of Information Systems and Director of the Center for Digital Transformation, has explored this question by quantifying the value of personal data to e-commerce platforms through the world’s first large-scale randomized field experiment involving 550,000 e-commerce users in collaboration with Zhejiang University and Alibaba, described in detail in his recently published article at Management Sciences, a top management magazine entitled “The Value of Personal Information in Internet Commerce: A Risky Field Experiment in Privacy Policy.”

The experiment uniquely explored the importance of data assets to the digital platform economy by disabling the algorithmic recommendation system based on personal data on the platform’s homepage for the test group. The results were revealing: When users were denied access to information flows recommended to them based on characteristics derived from their personal data, e-commerce platforms experienced an asymmetry in recommended products, which affected product diversity on the platforms and led to fewer transactions and a lower engagement rate.

Products recommended on the homepage dropped from 4 million to around 280,000, and the top 1,000 products from leading brands occupied 90% of the recommended spots, generating disproportionate exposure. Customers’ click-through rate (CTR) and page views (PV) dropped by 75.3% and 33.6%, respectively, and sellers’ gross merchandise value (GMV) and transaction volume dropped by a whopping 81.1% and 86%, respectively. Small and medium-sized sellers on the platform saw a 54% drop in page views and 90% in GMV, suggesting they were more severely affected than leading sellers, whose PV dropped by 27% and GMV by 79%. Research also found that consumers with low purchasing power are negatively affected.

This document provides a quantified basis for how to balance the use of data assets and the protection of personal data through large-scale experimentation, but also helps companies formulate more informed digital economic policies.

Professor Sun leads the CKGSB’s Center for Digital Transformation, which focuses on digital business, digital technology, and the impact on traditional enterprises. This research underscores the CKGSB’s commitment to groundbreaking knowledge that advances understanding and innovation in the digital economy.