More Pain For Tech In Europe?

What's going on here?

The European Union (EU) has proposed a new privacy law that could restrict “targeted” advertising (tweet this), threatening the business models of tech giants such as Facebook and Google.

What does this mean?

The proposed new law would require users to explicitly give their consent before tech firms can access users’ information on their devices (e.g. their browsing behavior). Tech firms use the data recovered through tracking to present users with targeted ads. In the view of the EU, the new law would prioritize users’ privacy over tech companies’ ease of tracking online behavior. The proposal needs to be approved by the European Parliament and EU member states before becoming law (so there could be amendments).

Why should I care?

The bigger picture: This could become a threat to Europe’s growing digital advertising industry.
Digital advertising is a fast growing market, and the ability to target ads is both a big part of its appeal and at the core of digital advertising firms’ business models. If the proposal becomes law, it could certainly hit the profits of giants like Facebook and Google, but it would probably be a bigger deal for companies that do proportionally more of their business in Europe.

For the stocks: Facebook and Google’s investors shrugged off the news.
The stock prices of Facebook and Alphabet (Google’s parent company) didn’t register the news on Tuesday. While Europe is important to these companies, it’s not their biggest market. Plus, there’s a good chance that lots of users would opt-in for targeted advertising if given the choice (especially if they have to in order to access the service the site is providing, as may be the case under the new law). Also, after decades of more stringent regulations in the EU than the US, investors are no longer surprised when US tech firms face new regulatory burdens in Europe.

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