Professor CKGSB estimates the value of personal data in e-commerce

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

Sun Tianshu, Distinguished Professor of Information Systems at the Dean’s Office of CKGSB and Director of the Center for Digital Transformation, explored this issue by quantifying the value of personal data to e-commerce platforms in the world’s first large-scale randomized field experiment conducted on 550,000 e-commerce users in collaboration with Zhejiang University and Alibaba, detailed in his recent paper published on Management Science, executive journal, titled “The Value of Personal Data in E-Commerce: A Field Experiment with High-Point Data Regulation Policy.”

The experiment uniquely assessed 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 a test group. The results were telling: when users were denied access to news flows recommended to them based on characteristics inferred from their personal data, e-commerce platforms saw an asymmetry in the products they recommended, which hurt the diversity of products on the platforms and led to fewer transactions and lower engagement rates.

Featured products on the homepage fell from 4 million to around 280,000, and the top 1,000 products from leading brands took up 90% of the featured spots, resulting in disproportionate exposure. Customer click-through rate (CTR) and page views (PV) fell by 75.3% and 33.6%, respectively, while merchant gross merchandise value (GMV) and transaction volume fell by as much as 81.1% and 86%. Small and mid-sized merchants on the platform saw a 54% drop in page views and a 90% drop in GMV, suggesting they were hit harder than leading merchants, whose PV fell by 27% and GMV by 79%. The research also found that consumers with low purchasing power were negatively affected.

This article provides a quantitative foundation for balancing data resource use and privacy protection through large-scale experimentation, and shows how companies can formulate more informed digital economy strategies.

Professor Sun leads CKGSB’s Digital Transformation Center, focusing on digital business, digital technology, and the implications for traditional businesses. This research underscores CKGSB’s commitment to pioneering knowledge that drives understanding and innovation in the digital economy.