Over the past year, large technology companies have come under public criticism for the way they handle users' personal information. However, many of the biggest privacy disputes are not over, and the outcome could affect the fate of some of the world's largest companies.
Tech giants have come under increasing criticism for possible violations of users' privacy, but so far, companies such as Facebook Inc Inc. (FB) and Alphabet Inc. (GOOG)'s Alphabet Inc-CL C have shown strong resilience. Although technology stocks have plummeted, advertisers are still writing checks to technology companies, whose profits are still growing in double digits, proving that most CEOs are doing a good job.
Technology companies are likely to be hit harder this year. Users are increasingly dissatisfied with privacy and other issues, such as the widespread belief that mobile devices and social media are addictive, which could dampen profit growth at technology companies, discourage employees or discourage advertising revenue. In Europe, regulators will make major rulings on the privacy practices of technology companies, a move that could lead to high-risk lawsuits. In the United States, revelations of lax privacy protection will put more political pressure on federal privacy regulation.
This affects the tens of billions of dollars marketers spend each year on targeted online ads, which rely on personal information such as web browsing, mobile app use, physical location, and sometimes using data such as income levels.
The behaviour of tech giants is likely to be an important topic at this week's World Economic Forum (World Economic Forum) in Davos, Switzerland. While the annual conference, attended by world leaders and corporate executives, usually celebrates how businesses solve the world's problems, last year tech companies came under fire in the face of accusations that inciting political polarization and building artificial intelligence (AI) would lead to millions of job losses.
Since then, the pressure has increased. Facebook Inc executives were forced to testify before legislators on both sides of the Atlantic after revealing that data about as many as 87 million users may have been improperly shared with Cambridge Analytica, a political analysis company. Facebook Inc said last September that hackers had hacked into nearly 50 million accounts.
At the same time, Alphabet Inc-CL C faces criticism of his privacy practices from political leaders. For example, Alphabet Inc-CL C came under fire after Alphabet Inc-CL C disclosed the personal data of hundreds of thousands of Google + social network users and initially chose not to disclose it, the Wall Street Journal reported.
Some technology executives also issued warnings. Apple Inc CEO Tim Cook spoke at an EU-organized privacy conference in October, calling on the United States to strengthen regulation and emulate the EU's strict new privacy laws. Cook said that some companies weaponized users' personal information, which he called a "data industry complex."
Both Facebook Inc and Alphabet Inc-CL C said they had invested heavily to strengthen the protection of users' privacy and welcomed stricter privacy rules. Both companies support the passage of a federal privacy law. Technology industry lobbyists say they plan to support US privacy legislation in the coming year, in part to avoid dealing with a variety of laws, such as the privacy law passed in California last year.
Josh Kallmer, executive vice president of policy at the Information Technology Industry Council (Information Technology Industry Council), which represents Facebook Inc, Alphabet Inc-CL C and other technology companies, said ∶ "our industry strongly supports enhanced consumer privacy protection." Kallmer said consumers "have benefited a lot from these technological innovations," but he also said, "there are also some very legitimate concerns about the way data is processed."
What will be the impact of stricter privacy rules? There are two theories.
One view is that stricter rules and enforcement will benefit large, established companies that already have access to large amounts of user data and will be able to further invest in legal compliance. Another view is that, like the rules in the European Union's new General data Protection regulations (General Data Protection Regulation, referred to as GDPR), once strictly implemented, large technology companies will have a major change in the way they collect and analyze personal information, their advertising business will be weakened, and their advantages over existing or potential new competitors will be weakened.
"both views make sense, but it's too early to tell which one will come true," said Alessandro Acquisti, a professor of behavioral economics who studies privacy at Carnegie Mellon University University.
One of the difficulties is how to distinguish between short-term and long-term effects. Alphabet Inc-CL C, for example, benefited at least initially during a transition period before GDPR took effect last May, in part because advertisers have transferred money to larger companies that have the ability to show users their consent to display targeted ads.
Two months after GDPR came into effect, Alphabet Inc-CL C's share of websites in Europe, including his ad tracking tool, increased by 0.9% compared with two months ago, according to Cliqz, which develops the consumer anti-tracking tool. Facebook Inc's share fell by 6.7%. The share of the other top 50 online advertising companies has fallen by more than 20%.
The long-term impact on big companies is harder to predict. Users' willingness to buy products has diminished after a study of nearly 10,000 online display ads showed that earlier EU regulations limited advertisers' ability to collect data in order to target these ads. But more research is needed to determine what broader impact tightening rules will have on consumer spending, Acquisti said.
The way regulators and courts advance the relevant laws will play an important role. Ireland's data Protection Commission (Data Protection Commission) is investigating complaints from privacy activists that companies sometimes require users to allow them to process personal data as a prerequisite for users to use a service, so such permits are not freely granted by users, as required by law. The commission is the main EU body that regulates Facebook Inc and Alphabet Inc-CL C.
Germany's federal antitrust law enforcement agency said it would make a final ruling on its preliminary conclusions on Facebook Inc at the beginning of this year. Its preliminary conclusion is that Facebook Inc used his influence as Germany's most popular social network to force users to allow the company to collect data about them from third-party sources. The German ruling will not involve fines, but may include orders to change business operations.
However, Facebook Inc and Alphabet Inc-CL C said they were abiding by the provisions of the privacy law.
A preliminary decision may be made this year, but no matter what route regulators take, their actions are likely to be tested in court. These cases will eventually determine how the new privacy standards will be applied. And the way it is applied will determine how far-reaching the impact can be.
"there are several places where there are ongoing lawsuits that have become extremely important," Kallmer said. Our industry believes that our side has a better chance of winning. "
By Sam Schechner; Mr. Schechner is a Wall Street Journal reporter in Paris. Email sam.schechner@wsj.com.
Copyright (c) 2019 Dow Jones Company. The copyright of this article belongs to Dow Jones and may not be translated or reproduced without permission.
Tech giants have come under increasing criticism for possible violations of users' privacy, but so far, companies such as Facebook Inc Inc. (FB) and Alphabet Inc. (GOOG)'s Alphabet Inc-CL C have shown strong resilience. Although technology stocks have plummeted, advertisers are still writing checks to technology companies, whose profits are still growing in double digits, proving that most CEOs are doing a good job.
Technology companies are likely to be hit harder this year. Users are increasingly dissatisfied with privacy and other issues, such as the widespread belief that mobile devices and social media are addictive, which could dampen profit growth at technology companies, discourage employees or discourage advertising revenue. In Europe, regulators will make major rulings on the privacy practices of technology companies, a move that could lead to high-risk lawsuits. In the United States, revelations of lax privacy protection will put more political pressure on federal privacy regulation.
This affects the tens of billions of dollars marketers spend each year on targeted online ads, which rely on personal information such as web browsing, mobile app use, physical location, and sometimes using data such as income levels.
The behaviour of tech giants is likely to be an important topic at this week's World Economic Forum (World Economic Forum) in Davos, Switzerland. While the annual conference, attended by world leaders and corporate executives, usually celebrates how businesses solve the world's problems, last year tech companies came under fire in the face of accusations that inciting political polarization and building artificial intelligence (AI) would lead to millions of job losses.
Since then, the pressure has increased. Facebook Inc executives were forced to testify before legislators on both sides of the Atlantic after revealing that data about as many as 87 million users may have been improperly shared with Cambridge Analytica, a political analysis company. Facebook Inc said last September that hackers had hacked into nearly 50 million accounts.
At the same time, Alphabet Inc-CL C faces criticism of his privacy practices from political leaders. For example, Alphabet Inc-CL C came under fire after Alphabet Inc-CL C disclosed the personal data of hundreds of thousands of Google + social network users and initially chose not to disclose it, the Wall Street Journal reported.
Some technology executives also issued warnings. Apple Inc CEO Tim Cook spoke at an EU-organized privacy conference in October, calling on the United States to strengthen regulation and emulate the EU's strict new privacy laws. Cook said that some companies weaponized users' personal information, which he called a "data industry complex."
Both Facebook Inc and Alphabet Inc-CL C said they had invested heavily to strengthen the protection of users' privacy and welcomed stricter privacy rules. Both companies support the passage of a federal privacy law. Technology industry lobbyists say they plan to support US privacy legislation in the coming year, in part to avoid dealing with a variety of laws, such as the privacy law passed in California last year.
Josh Kallmer, executive vice president of policy at the Information Technology Industry Council (Information Technology Industry Council), which represents Facebook Inc, Alphabet Inc-CL C and other technology companies, said ∶ "our industry strongly supports enhanced consumer privacy protection." Kallmer said consumers "have benefited a lot from these technological innovations," but he also said, "there are also some very legitimate concerns about the way data is processed."
What will be the impact of stricter privacy rules? There are two theories.
One view is that stricter rules and enforcement will benefit large, established companies that already have access to large amounts of user data and will be able to further invest in legal compliance. Another view is that, like the rules in the European Union's new General data Protection regulations (General Data Protection Regulation, referred to as GDPR), once strictly implemented, large technology companies will have a major change in the way they collect and analyze personal information, their advertising business will be weakened, and their advantages over existing or potential new competitors will be weakened.
"both views make sense, but it's too early to tell which one will come true," said Alessandro Acquisti, a professor of behavioral economics who studies privacy at Carnegie Mellon University University.
One of the difficulties is how to distinguish between short-term and long-term effects. Alphabet Inc-CL C, for example, benefited at least initially during a transition period before GDPR took effect last May, in part because advertisers have transferred money to larger companies that have the ability to show users their consent to display targeted ads.
Two months after GDPR came into effect, Alphabet Inc-CL C's share of websites in Europe, including his ad tracking tool, increased by 0.9% compared with two months ago, according to Cliqz, which develops the consumer anti-tracking tool. Facebook Inc's share fell by 6.7%. The share of the other top 50 online advertising companies has fallen by more than 20%.
The long-term impact on big companies is harder to predict. Users' willingness to buy products has diminished after a study of nearly 10,000 online display ads showed that earlier EU regulations limited advertisers' ability to collect data in order to target these ads. But more research is needed to determine what broader impact tightening rules will have on consumer spending, Acquisti said.
The way regulators and courts advance the relevant laws will play an important role. Ireland's data Protection Commission (Data Protection Commission) is investigating complaints from privacy activists that companies sometimes require users to allow them to process personal data as a prerequisite for users to use a service, so such permits are not freely granted by users, as required by law. The commission is the main EU body that regulates Facebook Inc and Alphabet Inc-CL C.
Germany's federal antitrust law enforcement agency said it would make a final ruling on its preliminary conclusions on Facebook Inc at the beginning of this year. Its preliminary conclusion is that Facebook Inc used his influence as Germany's most popular social network to force users to allow the company to collect data about them from third-party sources. The German ruling will not involve fines, but may include orders to change business operations.
However, Facebook Inc and Alphabet Inc-CL C said they were abiding by the provisions of the privacy law.
A preliminary decision may be made this year, but no matter what route regulators take, their actions are likely to be tested in court. These cases will eventually determine how the new privacy standards will be applied. And the way it is applied will determine how far-reaching the impact can be.
"there are several places where there are ongoing lawsuits that have become extremely important," Kallmer said. Our industry believes that our side has a better chance of winning. "
By Sam Schechner; Mr. Schechner is a Wall Street Journal reporter in Paris. Email sam.schechner@wsj.com.
Copyright (c) 2019 Dow Jones Company. The copyright of this article belongs to Dow Jones and may not be translated or reproduced without permission.