A Tale of Monetizing Personal Data
In the world of startups, ideas that initially seem groundbreaking often end up being what Y Combinator slang calls "tarpit ideas" – concepts that sound appealing but ultimately fail as a product. One such idea is monetizing personal data for people to earn money. Since the introduction of GDPR regulations, numerous Web2 and later Web3 protocols, apps, and projects have attempted this concept. Some still exist, but without significant real-world traction or meaningful income for users. Projects have given this model various names: Data Unions, Data DAOs, Data Liquidity Pools, each claiming to be unique yet each promoting a group of users contributing and governing data either be it personal data or publicly curated data. This idea gained even more traction with the public release of ChatGPT, prompting many Web3 founders to raise significant funds, release tokens, and enrich venture capitalists, yet following the same unsuccessful path. Projects like Swash, which lost 99% of its token value since its 2022 launch, exemplify these struggles. Recently launched Vana (L1) is another player, aiming to create a framework for many DAOs (DLPs) to monetize users data is yet to prove itself.
These initiatives often go through a short-lived hype cycle, printing tokens that quickly lose value without utility. When hyped token isn't present, there is a lot of work and hassle for the user to understand the concept of data ownership and monetization and lots of clicks till they monetize any personal data, but what value can they immediately get to go through all this trouble?
Our Journey and Learnings
Since January 2021, I have been exploring this space, avoiding VC money (mostly failing also to make deals 😋 and happy it failed) or launching useless tokens. I experimented with various paths, from health data to social media data, surveys, and interviews. The idea that data can generate money is indeed appealing, but without printing tokens and creating hype, the financial returns are negligible when the pool of users is yet small at the cold start.
Am i giving up on this idea?
No, but we are pivoting our strategy. Over the past three years, as a fresh PhD graduate with no startup experience, I learned a lot through trial and error. From Web3 technologies to building experiences rather than mere products, I discovered the importance of creating real value for users. A consumer application without users is worthless. Users don't adopt technology for its cool factor or grand visions; they seek applications that provide significant financial value, solve problems, or entertain them. More importantly found the right co-founder (Tobias) who has skills that do not overlap with me, building Datalatte together.
Building a dataDAO that creates user value, without relying on printing tokens, presents a challenge. The data itself isn't valuable enough at the beginning to generate significant financial gain (minimum $5/day). Hence, we must focus on solving a problem or entertaining users to create value for them (make them happy). While problem-solving can narrow the product's scope and audience, entertainment offers broader appeal.
The Shift to Entertainment: Datalatte's New Direction
Founders, including myself, often fall into the trap of finding cool technology and then trying to get it adopted. This is the wrong approach. First, identify the use case, then find the right technology and balance the user experience.
With this understanding, our journey with Datalatte led us to conclude that entertaining users with their own data is the most effective way to gain traction, solving the cold start problem. We aim to achieve this through frames on Farcaster, where user distribution is seamless, appearing directly in their feeds.
Why Entertainment?
A game is perhaps the best form of entertainment. Humans are naturally inclined to play games, engaging in quests and earning rewards. We decided to build an adventure text game that doubles as a DataDAO and inherit user's personal data contribution in the gameplay. By personalizing gaming characters based on users' cast history on Farcaster, we create a personalized gaming experience. These interactions gather more data, storing it in a knowledge graph that can eventually be monetized with user consent.
Unlike many businesses that exploit user data, we offer data ownership directly to users, allowing them to choose us as the trusted protocol for data monetization.
The Road Ahead
We invite you to read our litepaper for a deeper dive into our vision. Currently, we're excited to be part of the Backdrop program, working on launching NFTs and considering on-chain game engines like MUD and agents of Agentcoin. Our goal is to create an enjoyable game that handles user data with care and privacy, pushing toward data ownership and democratizing the data economy.
Experience it as a Farcaster Frame
Join us on this exciting journey, and let's democratize data & AI together!
