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

In a world where e-commerce platforms offer consumers a huge number of products, data assets are pillars of digital platform operations, as data-driven algorithm recommendations help users discover and purchase desired items. But what would happen 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 The university and Alibaba, detailed in his recent article published on Management Science, management journal, titled “The Value of Personal Data in E-Commerce: A Field Experiment with High Significance for 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 information flows recommended to them based on characteristics inferred from their personal data, e-commerce platforms saw an asymmetry in the products recommended, which harmed product diversity. on platforms leading to fewer transactions and a lower engagement rate.

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, which resulted in disproportionate exposure. Click-through rate (CTR) and page views (PV) fell by 75.3% and 33.6%, respectively, and seller gross merchandise value (GMV) and transaction volume fell by as much as 81.1% and 86%. Small and medium-sized sellers on the platform saw a 54% drop in page views and a 90% drop in GMV, suggesting they were more affected than leading sellers, whose PV fell by 27% and GMV by 79%. The research also found that consumers with low purchasing power are negative afflicted.

This paper provides a quantitative framework for balancing data resource use and personal privacy protection through large-scale experiments, and helps companies formulate a more conscious digital economy policy.

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.