The European Union’s General Data Protection Regulation is a gnarly hairball of regulation; on the one hand, it makes it virtually impossible to collect mountains of data and buy/sell/trade/mine it to a corporation’s heart’s content; on the other hand, it imposes a ton of expensive compliance steps on its targets like high-cost record-keeping, and it apportions liability to website operators whose advertisers are out of compliance with the regulation.
Here’s what that means: obeying the GDPR is hard and expensive; if you use an ad service that screws up its GDPR systems, you can end up on the hook financially for very large damages.
These twin factors — expensive compliance and liability for publishers with out-of-compliance ad-brokers — has enhanced Google’s business at the expense of its smaller competitors. The massively profitable, dominant Google can easily afford best-of-breed compliance, while the little competitors (including the scrappy Made-in-Europe competitors to Google) don’t have the same kind of resources. Some of these little guys just go out of business (or exit the EU market), and the remainder struggle to drum up business as publishers ask themselves whether they’re willing to risk costly penalties if their little-guy ad-broker turns out to be out-of-compliance.
But there’s good news, too: the amount of tracking in the EU has fallen off a cliff!Making web publishers responsible for the behavior of their ad partners has radically reduced the number of companies a publisher can vet, and thus how many trackers will appear on any given page.
It’s an important and timely parable about the way that regulation works in a highly concentrated market. The EU could have used antitrust law to break up Google and the other tech giants, but instead they opted to deputize companies (web publishers, primarily) to vet ad brokers, and to make ad brokers engage in costly record-keeping, which had the effect of making the market less competitive and more concentrated.
The irony is that the EU’s privacy rules were largely prompted by anxiety about Big Tech’s massive scale and the way that allows it to abuse its power and influence policy. If you think Google is a problem in 2018, just give it a decade with no competitors in the EU — you’re not going to like the results.
The reason this all matters now is that the EU is about to do this again, times a thousand: the new Copyright Directly imposes hundreds of millions of dollars in costs on platforms, forcing them to build black-box algorithms that censor anything that appears in a crowdsourced blacklist of copyrighted works. It’s backed by the giant European content barons, who’ve convinced the artists they exploit represent that this is in their interests, somehow. The new Copyright Directive is going to immediately destroy every potential challenger to Big Tech, especially the local European platforms.
Artists could get a better deal by backing measures that force Big Tech to pay its taxes, by lobbying for breakup of both the concentrated tech sector and the concentrated entertainment sector, and by pushing for a restoration of arts funding and the social safety net (including free university and college) that frees people to pursue artistic pursuits.
The Copyright Directive will definitely transfer a few hundred million from Big Tech’s balance sheets to Big Content’s balance sheets — but artists aren’t going to see much if any of that, and the share artists take home will continue to decline for so long as the big companies are allowed to grow bigger and choke out competitors.
One thing is certain: Google benefits indirectly from the effects of the GDPR, which led the online advertising market in Europe to become more concentrated, as the majority of advertisers lose market share. Google seems to have successfully taken advantage of the uncertainty around GDPR to further solidify its leading market position. On the other hand, many smaller competitors have been steadily losing market share since the GDPR came into effect.
A similar trend can be seen when looking at the entire tracker landscape in the EU: The average number of trackers per page has dropped by almost 4% from April to July. The opposite is true in the US: there, the average number of trackers per page has increased by 8 percent over the same period.
Study: Google is the biggest beneficiary of the GDPR [Björn Greif/Cliqz]
Just As Expected: GDPR Has Made Google Even More Dominant In Europe [Mike Masnick/Techdirt]