California just passed a major privacy law that will make it harder for Facebook and Google to track people and gather data

• California voters just passed Proposition 24, a ballot measure that expands the state's existing privacy laws and scales back the amount of data that big tech companies are allowed to collect on people.
• The law will make it harder for Facebook and Google to track people's activity through third parties, which could make much of the tech giants' advertising business models obsolete, experts told Business Insider.
• While Prop. 24 is only active in California, it will effectively apply to all of the US because of the state's huge influence on the tech industry.

A new law passed by California voters in the November election will set an unprecedented standard for digital privacy in the US, making it harder for big tech companies like Facebook and Google to track people's data.

The Consumer Privacy Rights Act, also known as Proposition 24, was on track to pass in California as of Wednesday morning, with 56% of voters supporting the measure and over three quarters of ballots counted.

The law will strengthen existing privacy measures in California, allowing consumers to stop businesses from selling or sharing their personal information including race, religion, genetic information, geographic location, and sexual orientation.

Complimentary Tech Event

Transform talent with learning that works

Capability development is critical for businesses who want to push the envelope of innovation.Discover how business leaders are strategizing around building talent capabilities and empowering employee transformation.Know More

It will also set tighter restrictions on how websites track your data in order to sell that information to advertising partners. Google and Facebook — two of the largest players in online advertising — both currently gather personal data collected by third party websites in order to strengthen their advertising products, which make up the bulk of their revenue.

Prop. 24 could effectively block companies like Facebook and Google from continuing to collect that data, which could change their business models and cut into their existing revenue streams, privacy compliance experts told Business Insider.

"I think the third party ad tech industry will need to evolve ... otherwise, their business models risk becoming obsolete," said Heather Federman, VP of privacy and policy at BigID, a data privacy compliance firm.

A Facebook spokesperson did not provide on-the-record comment when reached by Business Insider. A Google spokesperson did not immediately respond to Business Insider's requests for comment. Neither company has publicly taken a stance on Prop. 24.

The law comes as online ad giants' business models are facing other new threats. Apple is planning an iPhone software update that will let users opt out of ad trackers, which Facebook has vehemently protested. Web browsers including Chrome, Safari, and Firefox are rolling out similar tools to let users opt out of tracking, which could cut into advertisers' revenue.

Prop. 24 will become enforceable starting in 2023. Before that happens, California regulators are expected to provide more details about how it will be enforced, which could shape its impacts on major tech companies.

Despite its potential to hurt the ad revenue of major tech companies, Prop. 24 gained support from several tech business leaders who advocate privacy, including former Democratic presidential candidate Andrew Yang, who argued the law is necessary to give people more control over their data.

Raju Vegensa, chief evangelist at global software firm Zoho, said he expects both private companies and governments to continue to crack down on third party ad trackers because of growing privacy concerns from consumers. Vegensa added that Zoho removed third party trackers from its sites in July.

"That means we leave money on the table, but just because it's there doesn't mean you have to take it," Vegensa said in an email to Business Insider. "The privacy tipping point for most countries will come when they realize just how much data big tech companies such as Google have collected on their citizens and that as a government, there is nothing they can do about it."

Some privacy advocates have argued that the law doesn't go far enough, calling instead for Congress to pass privacy legislation that sets a single standard nation-wide. Advertising trade groups have voiced similar complaints, Adweek reported — they argue that more laws should be passed that protect consumer privacy, but that those laws should instead be drafted at the national level.