With a black eye and a sullied reputation, big tech may be entering an age of tapered profits, the victim of much-reduced public tolerance for the industry's free ride, say U.S. and European industry leaders, analysts and academics.
Why it matters: Google, Facebook, Amazon and other major platforms are symbols of U.S. tech prowess and expected to be among the country's most vibrant engines of future economic growth and jobs. But the new public zeitgeist casts doubt on how they have achieved their heights, and senior leaders at some of the companies themselves are internally rethinking their business models.
Quick take: Facebook and Google have built themselves up by offering free access to their platforms, while marshaling customer data into blockbuster, AI-driven machines that allow advertisers to micro-target eyeballs But Europe is about to activate new rules governing data, a shift that Citi, in a new report, calls "a game changer" that could spread around the world and wreak unknown financial havoc.
- The first rules, called the General Data Protection Regulation (GDPR), take effect May 25 and give consumers greater rights to control who gets their data.
- Later this year or in 2019, a second set of rules, called the ePrivacy Regulation, will put in place much more rigid requirements for individual consent for the sale and use of customer data.
- ePrivacy regulation is creating the greatest uncertainty. "The potential regulation could be watered down yet, but if this does not happen it could have a devastating impact on the online advertising industry and future innovation as consent becomes the be all and end all," Citi said.
Citi cites forecasts that ePrivacy could trigger a 70% reduction in European display ad revenue, and a 33% cut in digital ad budgets, either of which could eviscerate Facebook and Google, at least under their current business model.
Go deeper: Facebook's next big headache
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