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GDPR: Europe’s new privacy law will hand a huge advantage to American tech companies



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  • Europe’s new privacy laws are going to make the web
    virtually unsurfable in the EU.
  • GDPR and the ePrivacy law will require tech companies
    to get consent from any user for any information they gather on
    you and for every cookie they drop, each time they use
    them.
  • It will turn the web into an endless mass of
    click-to-consent forms.
  • Beneficiaries are likely to be US tech giants Apple,
    Google, Facebook and Amazon.
  • Losses will come at the expense of European companies
    like Criteo, WPP, and the German publisher Axel
    Springer.


New online privacy laws going into effect in Europe this spring
will hand a huge advantage to large American tech companies like
Apple, Facebook, Google and Amazon, at the expense of smaller
European publishers and advertising companies, according to
research from five different investment analysts, seen by
Business Insider.

While the likes of Apple and Facebook will benefit, it will come
at the expense of European companies like Criteo, WPP, and the
German publisher Axel Springer.*

Two new laws will come into effect in the European Union,
including Britain, sometime after May this year. The first,
called “the General Data and Privacy Regulation” (GDPR), requires
tech companies to get affirmative consent from any user for any
information they gather on you.

The second, “the ePrivacy law,” governs tracking cookies, and
requires tech companies to get affirmative permission from
consumers for every cookie they use, each time they use them. The
laws apply to any company that does business in Europe, even if
they are based outside the continent. So most American tech
companies have to obey this, too.

The laws have triggered a widespread freakout among tech
companies doing business in Europe.

Breaking the law will cost companies 4% of global revenues

The law imposes fines of 4% of
global annual revenues
, or €20 million (about $25 million),
whichever is larger.

The ePrivacy law will be particularly onerous for any business
with a website. News sites — like Business Insider — typical
allow a dozen or more cookies to be “dropped” into the web
browser of any user who visits. Cookies can signal to advertisers
that the user has arrived, so that ads can be placed on the pages
they are looking at. They can also record the user’s web history,
so that someone who might have looked at a website about shoes
can be targeted with shoe ads when they arrive at a different
website.

The new law requires users to affirmatively click on a permission
form several times, once for each cookie, before they can see the
content they clicked on.

Macquarie analyst Tim Nollen and his team describe it this way
(emphasis in the original):

“For each cookie dropped, both publishers and consumers will need
to ask if the placement of the cookie improves the internet
experience in order to be in compliance. Companies will thus be
forced to justify and may need to acquire consent for each cookie
that they place on each user. Each time.”


GDPR consent form goldman sachs
What Goldman Sachs thinks the browsing experience will
be like after GDPR comes in.

Goldman
Sachs


SunTrust Robinson Humphrey analyst Youssef Squali and his team
suggested to clients that the simple act of surfing the web in
Europe might become a nightmare of endless repeated consent-form
clicks:

“If a website is trying to track or deliver targeted
advertisements to an individual, that individual will have to
explicitly opt in each time he visits that particular site.”

The law also requires publishers to allow users to see their
sites even if they decline permission for cookies — meaning that
sites cannot simply put a “cookie wall” in front of their content
to block users who decline consent. They will be required to show
some content for free, in other words.

Europe already requires websites to warn all users that they are
using cookies, and to give users guidance on blocking them. But
the two new laws — which replace that warning — are more
stringent than that.

‘Coping with the new requirements and costs associated is also
likely to be more difficult for the smaller players’

GDPR contains some exceptions for companies that have ongoing
direct relationships with their users. Amazon, Facebook, Google
and Apple all require logins, and thus will find obtaining
consent from their users easier, according to Goldman Sachs
analyst Lisa Yang and her team. A login could function as
pre-existing consent for all future visits. She recently told
clients:

“We think organisations that have a direct and trusted
relationship with clients and can demonstrate a clear value
exchange are more likely to gain user consent (e.g. renowned
brands and publishers, GOOGL, FB, AMZN), while those that rely on
third-party data for targeting purposes with no direct user
relationship may find it more challenging (e.g. ad tech, ad
agencies). In our view, coping with the new requirements and
costs associated is also likely to be more difficult for the
smaller players (be it ad tech, brands or publishers).”

Dan Salmon, an analyst at BMO Capital, downgraded the stock of
Criteo — an ad tech company — to “market perform” in January
because of GDPR. “If GDPR implementation is materially negative,
the stock will likely be headed to the teens,“ he told clients.
The stock was trading at around $22 at the time of writing. (For
its part, Criteo told Business Insider it was ready to tackle
GDPR: “Even though the GDPR carries a firm compliance deadline of
May 25, 2018, Criteo has followed programs for several years that
put us in the position for full compliance by the required date,”
s spokesperson said.)

Analysts also see the new laws as negative for the large US
companies, mostly because all their European users will be
required to run a gantlet of permission requests, and they may
see users decline or reduce their engagement permissions.

Facebook’s “Custom Audiences” or its “Audience Network” products
— which allow advertisers to target Facebook users who may not be
on Facebook when they see those ads — will face difficulties, for
instance. Existing user databases won’t be grandfathered in —
companies will have to re-register all their users with data
permissions, according to the new laws.

But Facebook et al are bigger, richer, and have more lawyers and
software engineers to tackle the new laws than smaller European
companies, or news publishers. So while everyone will take a hit,
the big US players will emerge with less damage.

“Facebook and Google would be negatively impacted overall, but
would end up taking share,” Nollen told clients. “Assuming no
distinct restriction on whitelisting, browser providers may find
a new revenue stream by vetting online publishers and taking fees
to allow them to bypass default cookie blocker settings.” 


‘I think those guys probably won’t necessarily survive’

Strengthening the hand of US companies vs. their European
competitors is the exact opposite of the law’s original intent,
according to Yves Schwarzbart, head of policy for IAB UK, the
online ad industry lobby group.

“From those who remember when the GDPR was negotiated, it was
very much framed in the context of ‘How can we regulate American
tech giants and the way they use data from European
individuals?’” he told a Citi Research panel recently.

The new laws might kill some companies, he told Citi’s clients:

“I think where we will probably see less traffic in our space is
those publishers or those kind of services that users use to
perhaps kill time. You know, a sort of sensationalist headline on
some random publisher that you’ve never really accessed before,
just because you think, ‘Oh, God, I’ve got a minute to kill. Let
me just have a quick look at that article.’ I think those guys
probably won’t necessarily survive. If they then have to face
users with an information notice that is overly descriptive and
very long, users will probably think for that publisher, ‘I’ll
probably never visit them again, I’m not going to bother.’”

*Axel Springer owns Business Insider.


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