Google stole my data and all I got was this lousy search engine🍋
Google stole my data and all I got was this lousy search engine🍋
Details revealed in the US v. Google trial allow us estimate the dollar value of personal data
Google is a crazily successful company, built on a simple business model: it offers you a capable search engine, in exchange for collecting data about you that allows it to show advertisements targeted to you. Google makes the majority of its revenue by selling such advertisements — around US$176bn per year.1
Google’s critics have long lamented this business model, claiming that searchers aren’t paid enough for the personal data that Google collects. Implicit in this claim is the idea that this personal data is valuable — both to its “owners”2 and to digital platforms such as Google.
But just how valuable is personal data to its owners? Susan Athey et al. (2017) describe a “privacy paradox”, in which people say they care about personal privacy, yet they are willing to sell their personal data at a very low price. Angela Winegar & Cass Sunstein (2019) report that because of behavioural biases and a lack of information, both willingness-to-pay and willingness-to-accept measures are highly unreliable guides to the welfare effects of retaining or giving up data privacy. These issues make it tricky to determine how much people value their personal data.
We might do better asking the mirror question: How much do digital platforms value personal data about their users? We haven’t had a solid estimate of just how valuable such data is to digital platform companies — until now.
Last week, a Google witness in the US v. Google anti-trust trial accidentally blurted out that Apple gets a 36% cut of Google’s ad revenue from being the default search engine in Apple’s Safari browser.3 This was the final piece of data I needed to scrape together an estimate of the average search revenue that Google receives from each Apple user.4 As Apple users are, on average, richer than non-Apple users, we can treat this as an upper bound on the value to Google of an individual search user.
Pop quiz: just how valuable is your data to Google?
Before I present the calculations, please indicate your own estimate. (There is no right or wrong answer — I’m just interested in readers’ preconceptions.)
How many Apple users are there?
As of February 2023, Apple had more than 2 billion active devices. While iPhones predominate, this total also includes iPads, Macs and Apple Watches. This corresponds to 1.4bn individual users.5
What does Google pay to advertise to them?
Google reportedly paid US$18 billion a year to be Apple’s default search engine in 2021. More recent estimates put this at around US$20bn.
That means Google is paying Apple just US$10 per year per device, or US$14 per individual Apple user, to be able to show search-related advertising.
The big reveal: just how valuable is your data to Google?
And how much revenue does Google make from that “investment”? In the ongoing US v. Google trial, University of Chicago professor Kevin Murphy, appearing for Google, revealed that Google pays Apple 36% of the revenue it earns through search advertising.
Using that figure, Google’s average annual revenue is US$28 per Apple device, or US$39 per Apple user. After paying fees to Apple, net revenue is at most 64% of that — that is, US$18 per device or US$25 per user. (The actual figure will be smaller, as it costs Google to operate their platform for both searchers and advertisers.)
So, there you have it. Your personal data is worth no more than US$25 (NZ$43) per year to Google.6 Is that more or less than you were expecting? Let me know in the comments.
Google is the behemoth of advertising, with roughly 24% of global advertising revenue, even including billboards, print, TV and other non-digital media.7 Even if we assumed that everyone else was as efficient in turning personal data into dollars as is Google, then an average Apple user could be worth no more than US$104 per year to all of the world’s advertisers.
“You own your data” intermediators have failed to thrive
The idea that personal data is hugely valuable is pervasive. It has inspired for-profit and not-for-profit startups to create digital platforms that hold data on your behalf, and share the income from selling it, with your permission, to third parties.
Examples include citizen me (“take control of your digital privacy and reap the rewards if you choose to share your opinion or data”), Brave (“get rewarded for paying attention”), clture (“it's your data. Now get paid for it.”), and the Aotearoa New Zealand Data Commons Project (“unprecedented opportunities for individual citizens to manage and control the data they generate, and derive value from it for themselves”).8
None of these platforms has thrived. Now we have a plausible explanation — there just isn’t enough value on the table to support their business models.
Why might we feel that our data is worth more than that?
We all want to feel special. And these implicit valuations of data about us are, let’s face it, rather small. We tend to overlook the fact that there are 8 billion other humans sharing the planet. Google’s revenues don’t look so huge when we understand that more than 4.3 billion people use their services.
Your personal data is worth no more than US$25 (NZ$43) per year to Google
These figures are averages, but none of us thinks of ourselves as average. There may be good reasons why data about you is more (or less) valuable to advertisers. Evidence suggests, for example, that advertisers are willing to spend more to reach women than men, and to reach younger than older adults.
My analysis does assume that the data collected by Google and others is only put towards legal purposes. All of us have things best forgotten, or at least not widely shared. We might be willing to pay a lot to keep them that way. The business model that exploits this — blackmail — predates the digital era. Other ways that data about us can be misused include identity theft, and to target us for scams or ransomware. So, another way to value personal data is to ask what are we willing to pay to prevent a bad actor from using it against our interests? Surprisingly little, the researchers who reported the privacy paradox would say. Perhaps we should be willing to pay more.
“Google stole my data and all I got was this lousy search engine”
That claim makes a great headline, but it’s not necessarily solid economics. On the calculations I present here, you might be “paying” just US$25 a year for Google Search (on average).9 Is that a lousy deal? I’ll let you decide.
By Dave Heatley
Search advertising made up 57% of Alphabet’s (Google’s parent company) total revenue, according to its Q3 FY23 income statement. This amounted to $US$44bn in that quarter, or US$176bn on an annualised basis.
Definitions and intuitions about ownership are usually applied to land, material resources, and intellectual property protected by law (e.g. patents, designs, artworks). Such definitions and intuitions can be misleading when applied to data. (A topic for a future A↬I post!) In this post I’ll go along with a very common intuition of data ownership — that is, data about me is “my data”.
Safari is Apple’s web browser, installed by default on iPhones, iPads and Macs. Under a deal with Google, web searches initiated in Safari use Google Search by default, and display Google Ads along with search results. Google has a similar deal with Mozilla for its Firefox browser, reportedly paying US$450m in 2020.
Full disclosure. I own an iPhone and an iPad, and use Google search on both.
In 2019, around one billion individuals worldwide were using more than 1.4 billion Apple products. I’ve applied this ratio (i.e. 1.4 devices for each individual) to the 2023 estimate of the number of devices (i.e. 2bn), to arrive at the estimate of 1.4bn individuals using Apple devices.
I don’t have any numbers on the value of Android or Chrome users to Google. One might expect them to be less wealthy than iPhone users, so of less value to advertisers, and consequently generating less search revenue for Google. On the other hand, Google’s costs per user of providing Android and Chrome, which are essentially free to users, may be lower than what they pay per Apple user.
Including print, TV and other non-digital media, total world advertising revenue is approx. US$993bn annually. Google’s total advertising revenue is approx. US$238bn, about 24% of the total.
Examples sourced from Catherine Tucker (2023) The Economics of Privacy: An Agenda.
I am making a further implicit assumption here, that people’s utility is negatively impacted by advertising. However, advertising is likely to have positive utility for at least some recipients, some of the time — especially if well targeted. Such targeting is not possible without revealing at least some personal data.