California governor: Consumers should get paid a "digital dividend"

California Gov. Gavin Newsom has set off a flurry of speculation after he said the state's consumers should get a piece of the billions of dollars that technology companies make by capitalizing on personal data they collect.

The new governor has asked aides to develop a proposal for a "data dividend" for California residents but provided no hints about whether he might be suggesting a tax on tech companies, an individual refund to their customers or something else.

"Companies that make billions of dollars collecting, curating and monetizing our personal data have a duty to protect it," the Democrat said in his first State of the State speech Tuesday. "California's consumers should also be able to share in the wealth that is created from their data."

Tech companies, for example, sell the data to outside businesses that target ads to users. The European Union and Spain's socialist government last year each proposed taxing big internet companies like Google, Facebook and Amazon.

Legislation in the works

Common Sense Media, which helped pass California's nation-leading digital privacy law last year, plans to propose legislation in coming weeks that would reflect Newsom's proposal, founder and CEO James Steyer said, without providing details.

Starting next year, California's European-style privacy law will require companies to tell customers upon request what personal data they have collected and why, which categories of third parties have received it, and allow consumers to delete their information and not sell it.

U.S. Sen. Mark Warner of Virginia, ranking Democrat on the Senate Intelligence Committee, predicted in November that California would consider legislation that would "send a shiver down the spine" of tech companies.

He described the proposal as returning 25 percent of the value of an individual's data. It wasn't clear how the calculation would be made.

Warner's office said Wednesday that he made the comment after speaking with Steyer. Warner is considering federal legislation requiring companies like California-based Facebook and Google to provide users with annual estimates of what their data is worth.

Facebook user: $7.37 in value

Axios calculated that the average Facebook user is worth $7.37 to the company, while a Twitter user is worth $2.83, and a Reddit user, about 30 cents. The calculation basically divided the companies' annual revenue by their monthly active users.

Steyer promised "landmark legislation" that will change the way consumers view the value and privacy of their online information. Most consumers don't realize that companies "are taking your data at extremely detailed levels and selling it and monetizing it," he said.

"You're basically saying, 'It's my data,'" Steyer said. "And if you do use it, I would like a portion of that because you're monetizing my personal information. That's a big deal, and that will represent an enormous step forward for consumers in California and all across the country."

California-based tech giants Facebook and Google did not immediately comment.

Tax on data?

Newsom's office would not say who is leading his review. Newsom "is open to constructive input" from national experts and lawmakers, spokesman Brian Ferguson said in a statement.

The governor's office pointed to proposals elsewhere that would put a tax on data, including one that died in the Washington state Legislature in 2017. That measure would have taxed receipts from the sale of state residents' personal data at a rate of 3.3 percent.

Mahsau Daee of the Internet Association said the industry will look forward to reviewing the governor's eventual proposal but that "free and low-cost, data-driven online services offer Californians — and all Americans — enormous benefits."

Jeffrey Chester, executive director of the Center for Digital Democracy, said Newsom "is off to the wrong start" on protecting consumer privacy.

"They shouldn't be tricked into giving away their privacy for a small discount," he said in an email. "Selling it for a few bucks isn't the answer and will make the problem worse."

Dan Goldstein, president the digital marketing agency Page 1 Solutions, said a tax might not benefit consumers, while some sort of profit-sharing plan would likely return a "pittance of a benefit" to individuals.

Financial divide 

Facebook co-founder Chris Hughes last year suggested that users could band together to negotiate payments or a data tax could be administered, similar to a fund that annually shares oil profits with Alaska residents.

Consumer Federation of California executive director Richard Holober hailed the proposal while alluding to the vast financial divide between rich and poor, particularly in California, which is struggling to address homelessness and an affordable housing crisis.

The governor previously asked Silicon Valley companies to match $500 million in state funds with their own low-interest loans for developers to build homes for middle-income residents in some of the state's costliest areas.

"We have such a disparity here with everyday Californians who are having trouble paying their rent or sending their kids to college," Holober said. "California has created a very fertile land for these corporations to become fabulously wealthy, and they need to give back."

Newsom's announcement excited lawmakers who authored California's privacy law, but they had no information about it.

Democratic Senate Majority Leader Bob Hertzberg called the proposal "the next frontier of the online data and privacy conversation."

Democratic Assemblyman Ed Chau, who is chairman of the Assembly Committee on Privacy and Consumer Protection, said the proposal "highlights the value of data, which has often been described as the new oil in this technological data-driven economy."