Your Quarterly E-Zine
Edition 11 • December 2019

This website contains the latest edition of Forsyth Barr Focus, a quarterly on-line magazine written by senior members of Forsyth Barr's investment team.

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WHAT’S YOUR DATA WORTH?

Participation in the sharing economy includes sharing our data, a notion most consumers both knowingly and unknowingly accept as part of information exchange. Every day, our interactions with web based applications create information points such as location, preferences, and relationships that have the potential to be used by outside third parties.

The degree of data generated and the extent to which it is used to create a picture of your online personality is often lost on individuals. However, the recent Facebook/Cambridge Analytica scandal brought the world’s attention to this issue. The private data of 87 million Facebook profiles was extracted by consulting firm Cambridge Analytica and used to influence voters in major political campaigns such as the 2016 US Presidential election and the Brexit vote.

But how much is your data actually worth? Probably less than you think. Facebook, which in the US has 237 million monthly active users and generates US$19.5b in ad revenue, receives average revenue per user (ARPU) of US$82. Once we adjust this number for expenses and tax, the net ARPU is US$30. If Facebook were to pay each US user for usage of their data, the value to each US user would be less than US$30, as Facebook would need to make a profit on top of this. The value of a New Zealand user’s data would be even less than this due to our smaller market size and lower GDP per capita.

Source: Loup Ventures

This is in stark contrast to a recent survey of Facebook users, where almost 44% of respondents thought their data was worth more than US$500 per year. This shows a significant difference between what we think our data is worth compared to the actual value of it. The likely reason for this difference is the value we place on the privacy and sanctity of our data.

Internationally, regulators are starting to take notice of the importance of this issue, implementing greater policy measures to protect private data. The EU is leading the way with new regulation (the GDPR) becoming enforceable in late May 2018. The GDPR is designed to further protect the data of all EU citizens, whilst enabling large fines for companies that incur data breaches or are non-compliant, of up to 4% of their worldwide revenue.

In New Zealand, a number of listed companies have access to large amounts of personal data including Air New Zealand (through Airpoints), electricity retailers, and media/telco companies Sky TV, Trade Me and Spark. A recent breach at Vector, where the personal information of 24,000 app users was hacked highlights the fragility of our online information in our own country. However, offering up our data does expose us to benefits. Through smart meters, electricity retailers are able to garner private data surrounding electricity usage. With this data, household profiles can be built and more personalised electricity plans/products such as time of use tariffs can be offered.

Other indirect benefits include potential savings by limiting future grid investment. Whilst we are unlikely to be paid directly for usage of our data, even as regulations increase, the question becomes what are we willing to accept in savings as compensation?

The privacy of our data will continue to be an evolving issue worldwide and domestically as more of our lives and devices become connected.

Andy Bowley
Head of Research

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