ICLE Research Fellow Alec Stapp On Assigning Value to Data

Senators Hawley and Warner proposed new legislation that would require large tech companies to assign and publicly disclose a price for their user data. Alec Stapp argues in the Open Data Review Article “US bill would force online companies to assign value to data”, that this proposal is fundamentally misguided because the value of data is highly context specific. On the open market, an individual’s personal data is worth a tiny fraction of a penny.

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US Bill Would Force Online Companies to Assign Value to Data

By: Ken Silva | 25 June 2019

Bipartisan US federal legislation would require social media companies and other major online platforms to disclose how they are monetising user data.

Senators Mark Warner and Josh Hawley revealed the Designing Accounting Safeguards to Help Broaden Oversight And Regulations on Data (DASHBOARD) Act on Monday, which would require online companies with more than 100 million monthly users to tell consumers and financial regulators exactly what data they are collecting from consumers, and how it is being leveraged by the platforms for profit.

Commercial data operators would have to file annual reports on the aggregate value of user data they’ve collected, as well as contracts with third parties involving data collection, a bill explainer says.

The bill would also force the US Securities and Exchange Commission to develop methodologies for calculating data value.

Senators Warner and Hawley’s explainer touts the multiple benefits they said their bill would bring, such as allowing consumers to determine the true value of the personal information they are providing to platforms; attracting competition to the industry by shining light on the value of data; and helping antitrust enforcers identify “unfair” and anticompetitive conduct and deals.

“For years, social media companies have told consumers that their products are free to the user. But that’s not true – you are paying with your data instead of your wallet,” Warner said in a statement on the legislation. “But the overall lack of transparency and disclosure in this market have made it impossible for users to know what they’re giving up, who else their data is being shared with, or what it’s worth to the platform.

“Even worse, tech companies do their best to hide how much consumer data is worth and to whom it is sold,” Hawley added. “This bipartisan legislation gives consumers control of their data and will show them how much these ‘free’ services actually cost.”

However, the legislation has been met with skepticism by some who say that the senators have made unreasonable assumptions when crafting their proposal. Alec Stapp, a research fellow for the International Center for Law & Economics, said Warner and Hawley ignored the fact that the value of data is context-dependent.

“Online platforms are worth so much money because they have invested billions of dollars in R&D and capital expenditures to create superior products,” Stapp told GDR. “That investment leads to user data becoming valuable to that particular company — but virtually useless to any others.”

Stapp added that data about individuals is rarely sold on the open market, and when it is the price is often a fraction of a penny.

The Information Technology & Innovation Foundation also said the senators committed an economic fallacy by equating data with money, as the latter is a finite resource while the former is not.

“Unlike money, consumers do not have less data after sharing personal information, and they can share that same data with other services as well,” the foundation said. “On the contrary, for most commercial services, consumers always come out ahead by sharing data in exchange for a free service.”

The ITIF added that the requirements for companies to assign a value to each user would be expensive and probably irritating to consumers. The organisation did, however, support the proposal for the SEC to develop a methodology for calculating data value, and to determine sources for data collection and how companies safeguard data.