Following the startling revelations linked to the recent Cambridge Analytica fiasco, concerns run high about the possible misuse of user data by Facebook Inc. (FB) and the social media giants. Industry leaders and politicians also got into the spat, with Apple Inc (AAPL) CEO Tim Cook and Facebook CEO Mark Zuckerberg exchanging barbs. (For more, see Facebook Now Says More Users Hit By Data Scandal.)
How much is a user’s personal data worth? And how much can a large social network that collects basic user data and derives yet more data from his/her online activities, connections and networks, earn by (mis-) using/selling such personal user data? Hard to be sure, but we've made our best educated guesses.
The FT's Personal User Data Worth Calculator
In June 2013, the Financial Times built and revealed a unique calculator that allows one to check the worth of an individual’s personal data. It was aimed to provide an insight into the multibillion dollar “data brokerage industry,” which banks on profiting from trading thousands of data points pertaining to the personal and social details of the individuals across the globe. The calculator was last updated in July 2017.
Here we will explore the estimates provided by the FT personal data calculator, and attempts to gauge the possible money that can be made by a social media giant like Facebook from selling such data records.
For this analysis, we will take basic data points that Facebook users provide voluntarily, like age, gender and location. Additionally, there are other common data points that users willingly fork over while building their profile on the network, or are easily extractable from the user activity and updates posted on the network or by their connections. These data points include relationship status, family size, fitness and travel preferences, ownership of cars, property, and other assets, and shopping preferences.
screenshot, the FT's "How much is your personal data worth?" calculator
What factors change the worth of your personal data?
We use this calculator to generate the monetary value of the personal data points of an average Joe residing in America in a rented apartment, living a healthy life without any major ailments, working as an Accountant/Beautician/Health Professional with an average income, recently married with no kids, who wants to go on a foreign trip/cruise, and is a fitness buff. The value of personal data of such an individual comes to around $0.20.
Changing the job profile to other genres, like Company Owner, or Insurance or Banking Executive, does not make much difference to the data value of the person. However, changing the relationship status, from “Recently married” to “Engaged to be married” spikes up the data value to more than $0.30, a 33 percent bump in data value compared to the previous case.
Similarly, a “Recently divorced” status increases the value of your data by somewhere between 10-20 percent. “Having children” marginally increases the data value, but if you are “Expecting a baby,” then the data value increases by around 30 percent to $0.28. Makes sense. Such major events come with the potential of big expenses, which may include moving to a larger house, increased healthcare costs, and more expenses towards utilities. All this makes the user a big potential customer for various services and products. Social media networks can easily deduce such information through their algorithms that work in the background, even though the individual user may or may not explicitly mention these life milestones on the social media records.
Poor health makes your data more valuable
Health conditions too play an important role in calculating the worth of your data. The data worth of an individual with common lifestyle conditions like diabetes, back pain, headaches, or high cholesterol, shoots up to $0.46, a 130 percent spike! Such conditions may be easily traceable by the algorithms of Facebook, and by the cookies on the other health-related websites that you may visit for booking appointments, searching for doctors, or general querying.
If you own a home, the value of your data increases by 30 percent, and more so depending upon the size of your home. If you indicate any plans of moving to a new house through online searches, your data becomes more valuable as you achieve the elite status of being a potentially wealthy customer who can be targeted for selling a high value asset.
Indicating your preference for costly ownerships and activities – like premium cars, boats, airplanes and plans to join gym for regular exercise, will shoot up the data worth by 25 to 30 percent for each of the preferences.
The calculator also has a separate section titled “Consumer,” which allows one to calculate the worth based on his/her recent online searches for topics like food, cooking, car, gaming, political and government topics, social issues, education, loyalty card programs, insurance and other financial products. The more topics one has searched for, the more valuable his/her data is.
Trying out different combinations for a variety of user profiles, their browsing habits, and their preferences lead to the data value per American user to be in the range of $0.20 to $0.40.
How Much Does Facebook Potentially Make from User Data?
While estimates vary and it is difficult to map the precise value given the wide geographical reach of Facebook and the limited information available, an estimate can still be made based on certain assumptions. Extrapolating the data worth value derived from the above mentioned FT calculator for the number of American users of Facebook can lead to some interesting findings. (Related: 7 Secrets You Didn't Know about Facebook)
Statista.com reports that Facebook had around 230 million users in America in January 2018. Multiplying the number of American users to the earlier calculated data value that was in the range of $0.20 to $0.40 per individual leads to a range of $46 million to $92 million that Facebook may potentially generate from “selling” such data points of American users.
This figure looks miniscule compared to Facebook’s current market cap of around $480 billion, but there are couple of points to consider.
First, there are hundreds and thousands of targeted advertisement campaigns that regularly run on Facebook. Some advertisers may not necessarily run campaigns on Facebook, but can purchase the data points for separate use again leading to revenues for Facebook. Even if one assumes that an average campaign targets only 25 percent of the users for its desired target group, running 1,000 such campaigns by various advertisers will lead to 11.5 billion to 23 billion worth of revenue for Facebook for its American userbase.
Secondly, the above estimate is only for users of America, which stands second after India (250 million users) in the list of countries with most Facebook users. The U.S. is followed by Brazil and Indonesia at 130 million users each, then by Mexico (83 million), The Philippines (67 million), Vietnam (55 million) and others. The Facebook users in top ten countries add up to 1,091,000,000, while overall estimates cite the total number of global Facebook users at 2,130,000,000 – more than nine times the number of American users.
Ad revenues for running such targeted campaigns based on personal data points of users, or one-time purchase of user data, will vary across the globe depending upon local factors, advertisement costs, and reach. However, extrapolating the calculations to global levels, which has nine times the number of American Facebook users, indicate how much Facebook stands to make.
For instance, if only 20 percent of the total 2,130,000,000 global users are targeted by one ad campaign for a token amount of $0.20 per user data, the amount of money to be made comes to $85.2 million. Assuming 1,000 such targeted ad campaigns source these data points from Facebook, or run the campaigns on Facebook at a given point in time, the figure shoots up to $85 billion. Segregate the ad campaigns further at different locations, different costs, and different engagement levels, the numbers will shoot up significantly. For instance, a presidential ad campaign will target all age groups across all geographies in America, and other nations.
No wonder personal data is worth a big industry across the globe. (For more, see How Does Facebook Make Money?)
Disclaimer: Above estimates are based on projections as available on various online platforms, and don't necessarily represent any official figures quoted by any of the mentioned companies.