With GDPR coming into effect in less than one month, Silicon Valley’s tech giants have been scrambling to get ready. Facebook and Google have already deployed a significant amount of resources to make sense of this regulation.
Both companies have made significant changes on how users can access their privacy settings, and in some cases have withdrawn products from the European market because of the risk of non-compliance with the new privacy regulation.
Why GDPR Matters to Facebook and Google?
Before examining how Facebook and Google are already transforming their products and services to comply with GDPR, it is essential to understand why these tech behemoths with their multi-billion dollar annual revenues cannot afford to ignore this new privacy rule.
GDPR is designed to protect how personal information of EU citizens is collected, stored, and shared. If even a single EU citizen visits the website of a company based anywhere in the world and data is collected on the individual, that company must comply with GDPR or face severe fines.
Since the twin Silicon Valley titans rely on customer surveillance and advertising to maximize their shareholder profits, their revenue might take a big hit due to several regulatory challenges that the impending implementation of GDPR poses.
How Will GDPR Change Facebook and Google?
PageFair has made a “scale” which describes the extent of GDPR requirements in relation to Facebook and Google’s existing product and services.
According to the post, Google services and technologies that will be most affected by GDPR are:
- Certain targeting features of AdWords.
- Customer “Match”, which targets users and similar users based on personal data contributed by an advertiser.
- Remarketing lists for search ads.
Gmail, the most popular e-mail service in the world, will also be affected because Google mines the content and metadata of each email message sent and received in Gmail to target advertising.
On the other hand, Facebook technologies that will be most likely be affected by GDPR are as follows:
- Facebook Audience Network
- WhatsApp advertising platform
- Facebook’s Newsfeed
While Facebook and Google have direct relationships with their users, they are still not immune to disruption when GDPR finally comes into force. This is why both companies have already made significant internal changes to show how serious they are in their efforts to meet the new privacy requirements.
Some changes the major U.S. tech firms have made include:
- Google is asking users how much data they want to share via products like Gmail and Google Docs.
- Facebook is introducing a centralized data privacy center in which users dictate what ads are visible on their timelines and who can see their posts.
- Facebook is refining, and in some cases, eliminating E.U. product offerings that gather too much user data.
The 4% Annual Turnover: Hypothetical Fines for Facebook and Google
Companies that do not comply will face potential penalties of up to 4% of their annual global revenue or €20 million, whichever is higher. And for companies such as Facebook and Google with billions of annual revenues, the number of fines that the regulator might levy against them is extremely substantial.
To illustrate how massive the fines could reach, let us first discover the annual revenue of each company in 2017.
According to their financial report, Alphabet, Google’s corporate parent, records $110 billion in revenue in 2017. If they fail to meet the regulatory requirements of GDPR in May, Google might have to pay a penalty of $4.4 billion. In the case of Facebook, which annual revenue in 2017 has reached $40.7 billion, the dreadful 4% annual turnover fine could translate to $1.63 billion.
These potential fines are just the tip of the iceberg, however. Since GDPR prohibits any business to use the personal data they hold for advertising purposes without user permission, these two tech giants are also at risk of losing business in Europe.
In fact, according to Deutsche Bank analyst, Lloyd Walmsley, Alphabet Inc. could lose 2% of its revenue due to GDPR. Deutsche Bank estimates that about 33% of Google’s revenues (or $9.3 billion / £6.6 billion) come from Europe, and within that population, 30% of users might opt out of data sharing – which would ultimately hurt Google’s ability to deliver ads.
Conclusion:
It is essential to know how these two tech giants are making efforts to comply with GDPR because their action will most likely influence the smaller players in the industry. Regardless of the size of your company, implementing more responsible data practices is must to maintain a positive brand image, and avoid severe financial repercussion due to non-compliance.
To learn more about TeleMessage and our enterprise messaging solutions, visit our website today at www.telemessage.com
