Facebook and other tech giants will probably be hard-pressed to monetize their first-party data within the European Union, following a ruling yesterday by the EU’s top court that shot down Facebook’s “legitimate interest” argument for personalized ads.
What it means. The ruling is a shot across the bow for a lot of big tech businesses, says Tim Parkin, president of Parkin Consulting.
“It’s easier to hit a larger goal and that’s exactly what the regulators are attempting to do,” he says. “If they will stop (or decelerate) Meta, they will prevent the remaining of big tech from causing the identical issues.”
Parkin believes this and other EU actions will put an end to the present digital marketing paradigm.
“The larger concern for all of big tech is that the data privacy and protection war is heating up,” he says. “The business model of constructing the client the product was once viable and is now threatened. We’ll proceed to see big tech take a step towards paid subscriptions and away from ad-supported platforms.”
What happened. In 2019, Facebook parent Meta sued German regulators who ordered the social media giant to stop collecting users’ data without their consent. They said that not only was Facebook violating the EU’s GDPR, but that its dominance in social media made this an antitrust issue as well.
Dig deeper: EU fines Facebook $1.3 billion for privacy violations
The decision. The ruling says users’ privacy interest overrides the “legitimate interest” argument of Facebook to personalize ads. It said that despite the fact that Facebook is free to users, “the user of that network cannot reasonably expect” that it is going to use large volumes of data to personalize ads “without his or her consent.”
The decision shouldn’t have surprised anyone, says Gartner’s Matt Moorut.
“The European Union has been fighting for greater protection of consumers’ data for years, so the ruling, while a surprise within the timing, isn’t a massive surprise when it comes to its existence,” says Moorut, director analyst within the Gartner Marketing Practice. “GDPR established opt-ins to be used of data for email by default years ago, so this is solely a continuation of the principles already codified in law.”
What’s next. While the ruling only applies to Germany, a latest digital competition law will soon impose similar rules across the EU. Starting in March of next yr, the Digital Markets Act requires services with no less than 45 million monthly lively EU users to get user consent to
- Process personal user data,
- Combine it with data from other platforms
- Cross-use data from one service to one other.
Users who don’t consent must still have the option to use the service.
Why we care. With the top of third-party cookies drawing nigh, first-party data has been touted as one of the best, most reliable source of consumer information. Now, within the EU no less than, there’s good reason to doubt that.
Marketers don’t have to worry about this happening within the U.S., which has yet to enact much more basic national privacy protections. Even so, it is going to further complicate data collection and use here for firms doing business within the EU.
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