Federal government struggling to place value on internet activity

Keywords Technology

The Internet might be composed of zeros and ones, but U.S. officials are struggling to quantify the value of digital activities and integrate those numbers into public policy.

Federal Reserve Chairman Jerome Powell said this week that economic statistics are not adequately capturing the value of services delivered over smartphones and other devices. Meanwhile, California Democratic Gov. Gavin Newsom has proposed creating a “data dividend” that would require large tech companies to pay users for their data, which requires an understanding of how much the data is worth to companies such as Google and Facebook.

Other lawmakers are trying to outsource the math problem to tech companies, asking them to put a price on user data and regularly report that number to regulators.

It’s a new challenge in the digital age to measure and value consumer data, fed to tech giants by tracking us via our many devices, including work computers, phones and even smart TVs.

Using Facebook or Google’s search engine is free. But consumers are trading their data—and the ability for those companies to help target them with ads—in exchange for those services. That’s one reason that pair of sneakers you eyed online on one website might appear to chase you in ads around the Internet.

Google’s ad arm brought in $32.6 billion in advertising dollars for the second quarter, while Facebook took in $16.6 billion in the same period. Facebook said its 2.41 billion monthly active users generated an average of $7.05 each in revenue during the quarter, between ad activity and other payments and fees.

Powell

In Powell’s speech, he referenced research by MIT and the University of Groningen in the Netherlands. They found that people would have to be paid $17,530 per year to stop using search engines. Another group of researchers studied how much average users would need to be paid to deactivate their Facebook account for one year. The result: more than $1,000.

Consumers have their own ideas. To help fuel the multimillion-dollar advertising businesses of Google and Facebook, Joshua Rivera, an avid Twitter user, said he guesses his personal data is worth about $10,000 a year.

“Those companies take the same data and can use it for really good purposes or really bad purposes,” said the Albuquerque-based software engineer. “There’s nothing you can really do about which one they choose.”

For years, consumers have been willing to turn over their data in exchange for ads. But new concerns have surfaced about the type and volume of data collected, plus the way outside parties may abuse it.

Facebook, which has borne the brunt of public scrutiny over data privacy, said in September that it had suspended tens of thousands of apps for possibly mishandling user data. The announcement came a year after reports that political consultancy Cambridge Analytica had accessed the data of 87 million Facebook users and targeted them with political ads.

State attorneys general have launched antitrust investigations into Facebook and Google, questioning the industry’s access to vast amounts of data, while lawmakers and regulators are probing tech companies for potential antitrust violations.

Tech companies are responding to those concerns. Facebook launched a tool that allows users to limit the data they share with apps, businesses and other groups. Google has rolled out ways for users to automatically delete certain data.

Facebook declined to comment. In a statement, Google spokesman Aaron Stein said the company is “constantly investing in tools that help users control their data and automatic protections that secure it.”

How officials choose to value user data and internet-powered economic gains will affect how regulators police some of the world’s most-profitable companies, including the fines and taxes imposed upon those organizations. Plus, data that more adequately captures the digital age could allow economists to explain why U.S. productivity has slowed in recent years.

In remarks this week, Powell said some at the Fed have proposed valuing the services customers derive from their digital devices based on data volume. The research is in the early stages, he said.

“Good decisions require good data, but the data in hand are seldom as good as we would like,” Powell said.

Others say the value shouldn’t be measured at all.

In a statement, analyst Karen Gullo of the not-for-profit Electronic Frontier Foundation, a digital rights group, said privacy is a human right, and valuing data could trigger more problems. Gullo said the foundation opposes anything that could threaten to create a situation in which privacy is seen as “property that can be bought and sold,” even if users get paid in the process.

Newsom, California’s governor, is behind a proposal that would require big tech companies to pay users for their data.

“Giving out handfuls of dollars in exchange for data just lets companies’ invasive data collection remain unchecked,” Gullo said.•

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