San Francisco Chronicle - (Sunday)
Why data dividend proposal won’t fly
Newsom should increase taxes on Big Tech instead
Gov. Gavin Newsom declared his intention in his first State of the State address last week to tax the money gushers of tech and distribute their wealth to the less digitally fortunate. Here’s how Newsom described it:
“California’s consumers should also be able to share in the wealth that is created from their data. And so I’ve asked my team to develop a proposal for a new Data Dividend for Californians, because we recognize that your data has value, and it belongs to you.”
It’s a superficially daring gambit. Many pundits now proclaim that “data is the new oil,” and we all pay gas taxes, right? But if the dividend plan is meant as anything besides a political bargaining chip to get Facebook and Google to come crawling to Sacramento with concessions, it’s sure to prove to be all data, no center.
This notion of paying people for their data isn’t new. One of the worst business models from the dotcom boom was “pay to surf,” employed by companies that explicitly paid internet users for their time and attention. AllAdvantage, a Hayward company that exemplified the approach, had to yank its initial public offering and auction off its assets after blowing through millions of dollars.
The difference now is that the value of data is more certain — internet advertising was nascent 20 years ago, and it was far from clear what a user’s attention was worth — and the source of the putative dividends is not speculative venture cash but the tall billions Facebook and Google stack up every quarter selling ads.
Neither company responded to an inquiry about Newsom’s proposal. But Facebook help-
“We recognize that your data has value, and it belongs to you.”
Gov. Gavin Newsom
fully tots up exactly how much money it makes per user. Last year, it was $109.77 in the U.S. and Canada. Even a tenth of that would buy you a couple of Starbucks coffees.
But before you start dreaming of gingerbread lattes, let’s consider exactly what Newsom is proposing.
When I post a photo of my Jack Russell terrier on Instagram (which Facebook owns), Facebook is getting the bits and bytes that make up a video of her twirling a ball in the air and spinning to catch it. (As data goes, that’s priceless.) But Facebook isn’t selling that. It’s selling my attention, showing me an ad as I scroll through the feed.
Users confuse the two, argues Antonio García Martínez, a former Facebook product manager and author of the 2016 tech tell-all “Chaos Monkeys.”
“Their life data — their photos, their messages — they think that that’s being pimped out,” he said. “All of those life experiences, all that data you’re sharing, is completely ancillary to anything marketers are doing.”
García Martínez should know: He helped build some of Facebook’s hugely profitable ad systems. Most of the data that advertisers use on Facebook are things they collected on their own, not Facebook’s universe of shares and likes and posts. He offered the example of BMW detecting that you once browsed a page on the BMW USA website, and then funneling that information into Facebook’s ad machine to deliver tailored advertising to you.
Whose data is that? Yours? BMW’s? Facebook’s? Delve into the reality of how online ads are bought and sold, and you realize that it’s far more complex than saying that your data generated so many dollars in revenue and you deserve a cut. Your data actually isn’t that valuable. Your attention is, and it’s easily taken away, as the #deletefacebook movement has suggested.
García Martínez also objects to the “data is the new oil” metaphor. “Data exists within a certain context,” he said. The real value of data to a company like Facebook or Google is how it helps lure you to one of their services and keep you coming back. “The fact that you come and use a thing for free, that thing exists to sell your time.”
He points out that companies such as Acxiom and Experian do conduct a thriving business in providing your personal information to retailers and other marketers, but because they don’t make an app on your phone, they fly under the radar.
The state of Washington considered a tax on data sales in 2017, though the proposal was defeated. It was conceived as a burden on internet companies, but the way Google and Facebook do business, such a tax wouldn’t really touch them. True data brokers, on the other hand, would have felt the pinch.
Facebook co-founder Chris Hughes proposed something like Newsom’s data dividend last year in an essay published in the Guardian. For ordinary people to realize whatever value their data has, he argued, first they need protections for their privacy and against misuse of personal data. The European Union and more recently California have passed such laws, though implementation is still so early that the manner in which they will be enforced is not yet apparent. Hughes proposed two ways of extracting money from datacollecting internet companies:
One would have users banding together and essentially threatening to boycott companies that don’t meet their demands. Given the carefully designed addictiveness of social media services, that’s a pipe dream.
His other notion was to tax internet companies that collect and store data on Americans and distribute the proceeds as something like the royalty check Alaskans receive from the state’s oil riches. But again, that presumes that personal data is something like oil, a fungible commodity, as opposed to something that is valuable in some contexts — often when combined with other data — and worthless in others.
So, Gov. Newsom: By all means, have your team study this. It will take months to report back what should be obvious to anyone who has an inkling of how online data juggernauts operate: If you want Facebook and Google to pay more to ameliorate the social ills they cause, just raise their taxes.
That’s what voters in San Francisco — the city where Newsom got his political start — did recently when they passed Proposition C, which raised the gross receipts tax on all companies above a certain size, not just data hoarders or other narrow categories. Tech companies are clever enough at minimizing their taxes as it is. So why complicate things?
Owen Thomas is The San Francisco Chronicle’s business editor. Email: othomas@ sfchronicle.com Twitter: @owenthomas