The European Union recently proposed a new data-protection law that includes the controversial “right to be forgotten” – a consumer protection regulation which states, under the premise that data belongs to the individual, that people shall have the right to have data stored about them deleted if there are no legitimate grounds for retaining it.
If this regulation gained international popularity, it could force many of today’s most successful enterprises to change some of their core business practices. Increasingly, one of the most valuable assets that a modern technology company possesses is its ever-expanding cache of data collected about its users. This data compiles over time into an increasingly accurate representation of who those users are and what they like. It is then used to influence new content and features and to target high-quality and effective advertising.
The purpose of this article is to examine the business practices of some of today’s most successful companies and to explain how similar regulations could eventually impact their shareholders by changing the way these companies do business.
Google Inc (NASDAQ:GOOG)
Google Inc (NASDAQ:GOOG) collects and stores more user data than almost any other company out there. For many people, Google is the sole provider of nearly all web searches, video searches, mobile searches, email communications, GPS activity, web browser services, and all cellular communications and mobile experiences.
Google Inc (NASDAQ:GOOG) has generated big money from the “business of knowing.” In fact, Google shares recently hit an all-time high after announcing in January that it had earned an astonishing $50 billion in annual revenue for the year of 2012 – the majority of that from online advertising. But, what is it about Google Inc (NASDAQ:GOOG) that lets it consistently and absolutely dominate these important slices of the internet – even though they seem to have such a low barrier of entry for competition?
Google Inc (NASDAQ:GOOG) knows everything that anybody has ever done while on its services. This data allows them to build popular features, new products, and (maybe most importantly) make more money per advertisement than any of its competitors. However, if it’s decided that this data actually belongs to the user, not only would Google and its competitors have to comply with user demands that every bit of data the company has ever collected about them be deleted, but users could also demand that all of their data be transferred to a competing service before deletion.
This could have a serious impact on Google’s business – changing the way they improve products and structure privacy policies while lowering the barrier of entry for many new competitors.
Google shares are up 12% year-to-date, and up 31% over the last 12 months.
Facebook Inc (NASDAQ:FB)
Facebook Inc (NASDAQ:FB) remembers the time you did that one thing. You know what I’m talking about. That one thing. It remembers the embarrassing 2AM messages you sent about it. It even remembers those ridiculous posts about it that you eventually deleted.
In fact, there’s no company in the world that knows you like Facebook does. It gets a glimpse of the real you. And it’s not just you – it also knows all of your friends, family, and practically everybody in your community! It relies on compiling small bits of information from what you do and say to serve you with high-quality targeted advertising.
With more than one billion active monthly users, Facebook’s reservoir of posts, comments, likes, pokes, messages, and pictures is the largest collection of self-published thoughts, opinions, and human interactions ever assembled. Like Google, this data gives Facebook an incredible advantage over the competition.
Users can already remove themselves from the enormous social network, but they can’t yet take all of their information and data (posts, pictures, likes, comments, and all other historic activity) to a brand new competitor. If users were allowed to do this, Facebook would be forced to keep them incredibly satisfied with their privacy policies or potentially face a mass exodus to a competing service.