Data privacy regulation will be the biggest threat to the likes of Google, Amazon, Facebook and Apple over the next few years, according to a report by data and analytics company GlobalData.
According to the report, Data privacy – Thematic research, big tech has largely benefitted from “light touch regulation, strong political alliances, and near immunity from prosecution for activity that would be deemed illegal in the offline world” over the past few years. But that looks likely to change as events such as the Cambridge Analytica scandal have eroded public trust in big tech, with companies previously thought of as consumer champions now widely criticised for their data practices.
As a result, the report predicts that social media and tech giants look likely to face increased scrutiny in areas such as anti-trust, data security, tax avoidance and misinformation, but the area that will see the biggest increase in regulation is data privacy.
According to the report, data privacy regulation is gaining prominence as the very future of the ad-funded business model that supports Facebook, Google, and many others is at stake as the US looks likely to follow GDPR with its own legislation.
The changing regulatory landscape
Since the data practices of big tech have come under increased scrutiny, a number of regulations designed to protect user privacy have come into force throughout the world. In 2018, the European Union brought in GDPR regulations that require businesses to be transparent in how user data is used for advertising purposes, and give the option for users to opt out.
Along with this, the EU is working to introduce the ePrivacy Regulation, intended to replace the ePrivacy Directive and expected to come into force in 2021.
Since GDPR came into force other countries such as Argentina, Australia, and Brazil have taken steps to implement similar rules.
In the US, California brought in a Consumer Privacy Act (CPA), due to come into force in 2020.
An increase in data privacy regulation
However, the next decade looks likely to see increased pressure on regulators to bring in more rules, fuelled by growing public concern.
In the first half of this year, US Congress has already held several hearings on the issue of privacy, with the possibility of a national data protection bill. In light of GDPR, the report predicts that the US will follow suit, with a law likely to come into force by 2021.
The report highlights that privacy regulations have “tremendous relevance” for ad-funded platforms such as Facebook and Google, and stringent regulation could mean that these platforms have no choice but to rethink their underlying monetisation models, with advertising companies and internet platforms most affected.
Laura Petrone, senior analyst for GlobalData commented:
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“Advertising-funded companies are forging pure ad business models for the collection, sale, and use of personal data, with a number of non-material costs for customers, as they are designed to optimize the user’s attention to the detriment of data privacy.
“While compliance costs for big tech are almost certain to rise in the short-medium term, these companies will still have a rosy future in the long run, thanks to their resources and ability to adapt.”