Digital assets have been in existence for a while now, but in recent years with advancements in technology, the trend of storing information digitally instead of physically or through paper has been prevalent. Digital assets are anything that is stored digitally, ranging from documents and images to videos, music and software. These assets are in the form of digital data, or information made electronically available which typically have an assigned value. In this way, the value of the digital asset can be estimated using various tools and techniques. So, is it necessary to quantify the value of digital assets? In this article, we will discuss the concept of digital assets, their valuation, and the importance of having a proper valuation process.
Digital Assets
Digital assets may include business logos, business software, databases, electronic books and all other documents that can be stored digitally. Definitely, these assets are intangible in nature but they are important as they form the base of a company's operations. In the era where technology has emerged as the driving force of businesses, it is important to store information digitally instead of physically or through paper. However, it is important to track and properly maintain these digital assets.
What are digital assets?
Digital assets can be almost anything that is stored digitally and is of value to businesses. The types of digital assets or the type of information stored digitally may vary between businesses, but the concept remains the same. The importance of digital assets is evident as information may be used for a variety of business purposes and must effectively be recorded and stored.
For instance, the logo of your brand is a digital asset that is used to create and maintain the identity of the brand. You may be wondering how a logo can be a digital asset. Well, the logo is not just a symbol or a design, it is an asset of a company that is digitally stored. Similar to any physical asset, your company's logo may have a value attached to it. However, the value of the logo may be difficult to estimate in monetary terms.
What are the elements of digital assets?
Any digital asset will be made out of a combination of the following three key elements, which together make up the digital asset:
1. The asset must be a digital file that the owner has the right of accessing and protecting. Documents, presentations, books, music, video files, and software are all examples of digital assets.
2. The asset must provide some sort of value to the owner. Assets such as a website, an app or an e-book may provide marketing or informational value to an individual or company.
3. The asset must be easy to find and discoverable. It can be found by using a search engine or through an application that makes use of a digital asset. This element will help with the verification of the digital asset.
As a result of these three elements, it can be said that digital assets would be stored in the form of digital data. However, if the three elements are not properly tracked or documented, then it would be difficult to prove that the asset is indeed a digital asset.
How are digital assets different from physical assets?
Digital assets differ from physical assets because, due to their intangible nature, they cannot be touched and seen. You can’t touch a website or an e-book. However, they are a valuable means of communicating and providing information. You can use a website to view a presentation or a report written by someone, or you can use an e-book to read some news, read about different brands and products, or learn about new technologies.
This distinguishing characteristic of digital assets between physical and digital helps us to understand the concept of a digital asset. However, the ownership of a digital asset is similar to a physical asset. The owner of the digital asset has a right to view, edit or remove it. Thus, the major differentiation lies in the fact that a digital asset can be accessed and protected through the use of a digital device or program that is basically not a physical object.
How can you secure and maintain digital assets?
Well, the concept of copyright and intellectual property rights will address the issue of digital assets. Popular articles, books and digital files should be copyrighted so that others cannot use them without the permission of their owners. There are different methods of protecting or maintaining these assets, depending on the type of asset. Essentially, digital assets are considered to be a type of information which may involve a number of important elements and processes, such as the proper management of digital assets, exposure and use of digital assets.
Digital Assets Management (DAM) comprises the management of digital asset rights in order to ensure that the owners have rights over their assets, and also to ensure that the assets are used correctly. DAM is concerned with the storage, sharing and protection of digital assets.
Does a digital asset have value?
Any digital asset will have value, but the monetary value of a digital asset is difficult to estimate. However, there are certain digital currencies nowadays, such as bitcoins, gift cards, and loyalty points, that are indicative of the value of a digital asset. The idea behind the value of digital assets falls into the concept of supply, demand, future returns, and value drivers.
For example, a company that has a website will usually have a domain name, which is again, a digital asset of a company. Further, it can be sold similarly to any other asset, and thereby it will definitely have a value basis for the same. However, the value of digital assets is difficult to estimate and can be influenced by a number of different factors.
Valuation of digital assets
Now that you know about digital assets and how they influence the business world, you may be wondering how you value these assets. This will depend on the type of asset, the way in which it is used, and the value that it provides. There are a number of methods available for valuing digital assets, and you can use these methods based on your objective. However, for best results, you must make sure that your digital asset valuation process is coherent and reliable.
What is digital asset valuation?
Valuation is essentially a process of assigning a monetary value to a digital asset. This process can be automated or manual and will depend on the type of asset. While valuing digital assets is not an easy task, it can be achieved through different methods. Generally, identifying the source of the digital asset and the purpose of the asset can help with valuing digital assets. As a result, it is important that you determine the scope of your valuation and define your objectives before starting any kind of digital asset valuation.
Why do we need digital asset valuation?
Digital assets have gained importance in the current business landscape. Various people and businesses use different digital assets for various purposes. This means that the value of these digital assets needs to be determined and assessed for purposes such as assessing risks related to digital assets, protecting and defending rights connected with the use of the digital assets, analyzing future returns and so on. Following are a few benefits associated with digital asset valuation:
1. To make informed decisions for using digital assets for future returns, the valuation of these assets can be done to assess the return on investment. It requires a careful analysis of the cost and value of digital assets and their potential for further use.
2. The management of digital assets is a complex process, and the valuation of these assets helps properly manage all aspects of the asset. When a value is assigned to a digital asset, it becomes easier for businesses to determine their risk exposure to the same
3. Digital asset valuation helps in the determination of the financial viability of digital assets, which is very important in the current business environment where electronic transactions are common
4. Valuation of digital assets is important to ensure that the ownership rights are maintained, and hence it helps in the protection of the asset. When there is an assessment of digital asset valuation, it helps businesses to establish their rights and obligations over their digital assets
5. Digital assets are the backbone of a company. Brand logos, websites, images, videos, and other forms of digital assets are commonly used for brand awareness. Digital asset valuation helps to establish the value of these assets and identify the scope of their usage.
What are the key factors considered in digital asset valuation?
The basis or principles for any digital asset valuation will depend on various factors. Following are a few factors that are considered during digital asset valuation:
1. Value-driving assets - For every digital asset, there are certain value drivers associated with it. First and foremost, the digital asset should be categorized on the basis of usage, and determine that is it possible to use these assets outside the scope of business from which they can derive value. In addition to this, identify whether it generates economic value or provides just social value.
2. Creating business value - The business value of digital assets depends on the type of asset, its usage and all other associated standards. Digital assets should have an assigned monetary value, which should be the value of all future returns associated with the usage and storage of the asset. This ensures that the asset is economically viable and has the potential for wealth generation
3. Future prospects of the asset - The projection of a digital asset should depend on the potential for development and the rate at which it can generate future returns. This is an important aspect of any business, and this will not only determine your profitability but will also help you determine the value of the asset over time. Therefore, future prospects of the asset will help businesses to form strategies for creating wealth through these digital assets.
Conclusion
Now that you know how important it is to value digital assets and the need for digital asset valuation. Valuation of digital assets requires thorough planning and analysis to arrive at the most accurate results.
