How to Calculate the CCPA’s 50 Percent of Revenue Threshold
A business must comply with the CCPA if it:
Derives 50 percent or more of its annual revenues from selling consumers’ personal information.
It sounds simple: do you get 50% of your revenue from selling information to others? Most retail companies would answer a resounding no.
But if we take a closer look at the requirement, the CCPA isn’t concerned with how much revenue you received from selling personal information, it’s concerned with how much revenue you derived from selling consumers’ personal information.
Let’s put this in the context of the CCPA’s broad definition of selling. We posted a two-part series on why interest-based advertising may be considered a sale under the CCPA. If your business treats interest-based advertising as selling, and derives 50% or more of your sales revenue from interest-based advertising, the CCPA applies to you.
How to Calculate If Your Business Meets The 50 Percent of Revenue Requirement
There are many different ways of calculating if you meet the 50% revenue requirement of the CCPA. We’ll walk you through an example of how a company might make this calculation.
Let’s pretend there is a company that sells ear muffs, Haute Ears. Haute Ears earned $900,000 in revenue in the past 12 months and has an online store only. Below is an example of how they learned that they do in fact need to comply with the CCPA:
Haute Ears began using Google Ads 6 months ago. During that time they saw their revenue increase significantly. Haute Ears closely tracks view-based conversions and click-based conversions.
Let’s discuss what these terms mean.
View-based conversions (also called view-through conversions) occur when a web user views an ad for Haute Ears on Google. The user does not click the ad. If the web user then goes to Haute Ears’s website and buys ear muffs within a 30-day frame, that counts as a view-based conversion.
The timeframe for conversion (30 days) was something that Haute Ears defined; similarly, the action that constitutes a “conversion” was also something that Haute Ears defined. They could also pick a 90-day time frame and consider “conversion” to be someone providing their email to receive discounts and deals.
Click-based conversions occur when a web user views an ad for Haute Ears on Google and clicks on the ad. If the web user then buys ear muffs within a 30-day frame, that counts as a click-based conversion.
Again, the time frame conversion and the conversion event are defined by Haute Ears. Conversion events and timeframes are key decision a business makes for itself.
Using their website analytics tools, they were able to calculate that $500,000 in sales were linked to either view-based or click based ad conversions.
Haute Ears has derived 55% of their revenue from interest-based advertising, which they consider to be a sale under the CCPA. Therefore, they must comply with the CCPA.