Consensus on whether Google and Facebook stand to win or lose as a result of Europe’s new data-privacy laws seems to be changing.
Popular opinion has been that the direct relationship Facebook and Google have with consumers will make it easy for them to obtain consent, and as such they will ultimately be at an advantage. But as the deadline for the General Data Protection Regulation‘s enforcement edges closer and the ePrivacy Regulation continues to loom, a different line of thinking is emerging: that Google and Facebook are also in for a thrashing, in the short term at least.
Last week, Facebook’s way of processing personal data was spotlighted for potentially being illegal under the GDPR. A recent study by Charles III University of Madrid found that 73 percent of Facebook’s European users were targeted by marketers based on personal characteristics, which will be illegal under the GDPR, the Financial Times reported last week.
In truth, any claims of what’s illegal or not under the GDPR, can only be a matter of guess work until the law kicks in. But the article has spotlighted an argument that hasn’t yet had much air time: that Google and Facebook may indeed suffer, along with everyone else.
For instance, Google and Facebook will be prime targets for privacy groups, and that will be off-putting for advertisers. “There will be a seasonal dip in ad spend as people work out what the hell it [the GDPR] is and how risky it is,” said Dan Wilson, CEO of tech vendor London Media Exchange. “The first time any privacy groups bring a case against Google, Facebook, Apple or companies like Xaxis, everyone will panic and yank spend. Facebook and Google are the obvious targets for the privacy groups, and brands will not want to be seen on the sharp end of that.”
General fear around fines could cause some marketers to rein in spend on specific ad targeting products such as Google’s Customer Match and Facebook’s Custom Audiences products, according to Brian Wieser, senior research analyst at Pivotal Research Group. Plus, marketers may invest more heavily in their own digital assets and aim to deepen their own relationships with customers, rather than rely on a media owner as an intermediary, which could lead to less spending more generally, said Wieser.
“There is significant uncertainty about the implications, but it seems at least slightly negative for the two companies [Google and Facebook], and possibly worse than that,” he added.
Google and Facebook could suffer from simply having less user data to use for ad targeting because more people will opt out of sharing it. Deutsche Bank has already estimated that the GDPR will likely shave 2 percent from Google’s corporate parent Alphabet. According to Business Insider, Deutsche Bank estimates that Google generates $9.3 billion in revenue from Europe — 33 percent of its total revenue — and that 30 percent of users may opt out of data sharing, which will hurt its ability to deliver ads.
General consensus has typically leaned heavily toward the fact people won’t be able to resist giving consent, given the products of the duopoly have become such daily habits for many. Some companies, like ad tech firm PageFair, are making the case that Google and Facebook will actually face serious challenges getting people to opt in for many of their products, which will hurt their ad revenue. According to PageFair’s Jonny Ryan, consumers have “little incentive” to give consent for products like personalized AdWords ads and Gmail ads. The same can be said of Facebook’s Audience Network and WhatsApp ads — people won’t be incentivized to opt in for them, he added.
Although Google and Facebook both have enviably large logged-in user bases across their multiple product sets, they’ll be hampered from bundling consent across them. That’s a factor that some lawyers have said will restrict Google and Facebook. On behalf of publisher trade group Digital Content Next, law firm Frankfurt Kurnit Klein & Selz analyzed the impact the ePrivacy Regulation could have on Google and Facebook, finding that the regulation will dramatically curb the duopoly’s ability to collect and process data, with a major reason being they cannot bundle consumer consent across products. This means they can no longer target ads based on data across services like WhatsApp, Gmail and Messenger.
The debate about whether the duopoly will win or lose will likely swing back and forth for some time. Google has 750 engineers working on privacy features across its products. “They’ll win with this by throwing lawyers at the consent problem and product people to make their services even stickier,” Wilson said.
“Those saying they are losers are those who have a history of hating on the duopoly. It’s wishful thinking,” said Paul Lomax, independent publisher consultant and former CTO for magazine group Dennis. “They do have big targets on their backs for consumer action, but they’ve both been sucking up to regulators for the last few years and have built privacy tools far better than anything publishers or ad tech have.”
In Germany and France, the debate remains black and white: Platform providers will benefit strongly from the planned ePrivacy Regulation because of their continued access to their users’ personal data, which they get from having large volumes of logged-in users for their products — essentially one gigantic registration base. That’s why publishers in those countries are trying to offset this perceived additional advantage for the platforms by building their own scaled logged-in systems.
“Short term, they [Google and Facebook] will take a hit; long term, they will win — and win big,” Wilson said. “The European Union has basically screwed their publishers by trying to stop Google and Facebook.”
For more on GDPR, download Digiday’s new guide.
The post How GDPR could weaken, not strengthen, the duopoly appeared first on Digiday.