As tech corporations around the world face mounting pressure from regulatory bodies and consumers seeking more control over their online privacy, new regulation from the European Union could actually serve to strengthen America's most powerful data-driven advertising businesses.
Silicon Valley digital giants Facebook Inc. (FB) and Alphabet Inc. (GOOGL), who have seen their shares weighed down by investor fears over more regulation following a series of scandals regarding their use and protection of troves of consumer data, are seen as gaining their lead against smaller names when Europe's sweeping new General Data Protection Regulation (GDPR) is enacted next month. (See also: Tech Still Reigns Over the Market: Credit Suisse.)
While Brussels intends for the GDPR to limit tech behemoths and their partners from pressuring consumers to sign away control of their data in exchange for services, the restrictions may have in the unintended consequence of reinforcing the FB-GOOGL duopoly, reported The Wall Street Journal. By requiring tech companies to ask for users' consent for their data, consumers could be more prone to trust recognized names with their personal information than unfamiliar newcomers. Lesser-known startups also lack the resources needed to get permission from users, a non-issue for deep-pocketed tech titans.
Big Tech and the 'Right to Be Forgotten'
The news comes as U.S. lawmakers weigh more regulation on the tech sector following Facebook's headline-making Cambridge Analytica scandal, which led Chief Executive Officer Mark Zuckerberg to testify in front of Congress. Alphabet has also been under pressure regarding its use of consumer data on its YouTube platform, as some suggest that its data-collection is more robust than Facebook's.
If the past is any indication, however, privacy regulation may do little to thwart big tech's influence. For example, in 2014, a European high court decision allowing users to have the "right to be forgotten" online, or have all of their search results deleted, worked to make Google a "chief arbiter of what information is kept online in Europe," as noted by The New York Times.
Despite worries over digital advertising, Zuckerberg said that recent scandals have had no meaningful impact on the social media platform's business, while analysts estimates for the company's revenue have actually increased since the start of 2018. Alphabet's Q1 results included a 26% year-over-year (YOY) growth in revenues to over $31 billion, driven by continued strength of its bread-and-butter advertising business. (See also: Apple Vs. Facebook: May the Best Stock Win.)