The key concern underlying this legislative push is the fact that users think they are gaining access to social media sites like Facebook and Twitter for free but are instead paying for access to each site with their data. Without this transaction of access for your user data, users would not be able to create an account on these sites. Senator Mark Warner, one of the co-sponsors of the Senate legislation, aptly noted that “for years, social media data 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”. Senator Warner further stated that “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.”
Most social media websites do not actively calculate and publish the value of their user’s data. However, the world’s largest social media website Facebook does calculate and release the value of its user’s data in its Annual Report. Facebook defines the “Average Revenue Per User” or “ARPU” as:
We define ARPU as our total revenue in a given geography during a given quarter, divided by the average number of MAUs [Monthly Active Users] in the geography at the beginning and end of the quarter.
In Facebook’s 2018 Annual Report, Facebook declared that as of December 31, 2018, the ARPU worldwide is $7.37. Strikingly, the ARPU in the United States and Canada as of December 31, 2018 is $34.86, followed by an ARPU of $10.96 in Europe. Other social media sites do not actively calculate or publish their ARPU, but you can roughly calculate that number by dividing the total revenue by Monthly Active Users. At the end of 2018, Reddit’s ARPU was roughly $0.30, while Twitter’s was roughly $9.48. However, the granularity of ARPU data is not publicly available for these sites, unlike Facebook.
What does this mean for the proposed Senate legislation?
Moving forward, we might expect more social media companies actively calculating and publishing their ARPU data to match Facebook’s current practice. By being more transparent with their valuation of user data, social media companies can try to alleviate the concerns motivating the proposed legislation by disclosing the metrics they use to value data. Otherwise, if the legislation becomes law, they may be subject to even stricter disclosure requirements.