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Crunching Car Data for Cash: An Israeli Startup Takes on Google

Feb. 21, 2018
The data processed by smart car sensors could be worth hundreds of billions, and an Israeli startup is helping Detroit grab it before Silicon Valley does.

The road to profits is paved with good data.

Every hour, a modern car processes about 25 gigabytes of information — the equivalent of about seven full-length high-definition movies — on everything from engine temperature and tire pressure to what’s playing on the radio. For automakers, the question is how to turn that into revenue. An Israeli startup claims to have the answer.

Otonomo, which announced $3 million in funding from NTT Docomo Ventures Inc. on Tuesday, has spent the past three years figuring out how to collect, package and sell such data to insurers, retailers, city planners and others willing to pay for it. In return, it takes a percentage of sales — similar to how Apple Inc. and Google operate their app stores. More than 2 million cars are already on Otonomo’s platform, a number that it says will reach 5 million by year-end.

"There is one simple rule with marketplaces all across the board — one takes 80% and the rest are left with 20," said Ben Volkow, Otonomo’s chief executive officer and co-founder. "The way to become that one is to get as many cars on the platform as fast as possible and become dominant."

Daimler AG said last year that it’s testing the startup’s cloud-based platform, and Otonomo said it’s planning to unveil a commercial pilot agreement with a Japanese auto manufacturer within three months. The Herzliya-based company said 10 automakers and 11 auto-related companies are providing data in pilot programs. Including NTT Docomo Ventures’ investment, Otonomo has raised about $41 million in funding. Previous backers include Bessemer Ventures and Dell Technologies Capital.

The market for automotive connectivity services will be worth $750 billion by 2030, according to McKinsey & Co. While carmakers have poured billions into developing connected cars, they’re concerned Google and other software-driven companies will control the flow of profits. Akio Toyoda, president of Toyota Motor Corp., has said that connected-car data could be the automaker’s biggest potential source of new revenue and is building its own telematics system.

"It really is a necessary and lucrative angle," said Kevin Tynan, auto analyst at Bloomberg Intelligence. "The strength of this approach is that Otonomo itself doesn’t monetize the data, they merely gather, aggregate and process it. And there will be more and more of it as the industry tries to achieve profitable self-driving and ride-share business models."

Otonomo has developed technology to make it easier to distribute and use connected-car data by securing, anonymizing, standardizing, and aggregating information within a labyrinth of regional regulations. Insurers were one of the earliest buyers of data on Otonomo’s marketplace. They already offer lower premiums to drivers willing to install data-reading hardware or download data-tracking apps. Such services let them offer incentives to drivers who don’t drive too fast, or save on towing fees by detecting mechanical issues early.

Otonomo said it’s conducting trials with two ride-hailing companies that want to use data to do things such as matching riders with cars that have sufficient gas for the trip. Utility companies are monitoring batteries in electric vehicles to manage congestion at charging stations, while hedge funds say they will pay for data that can help understand trends in retail and housing markets.

Otonomo isn’t the only company looking to cash in. Verisk Analytics Inc. is also offering telematics data to insurance companies in the U.S., while Microsoft Corp. and International Business Machines Corp. have unveiled their own connected-car platforms that leverage their expertise in machine learning and cloud services.

by Kevin Buckland and Pavel Alpeyev

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