Europe’s Forthcoming Data ‘Freeze’ and Why We Need to Care
There was a modicum of good news recently when the U.S. Department of Commerce’s “Privacy Shield” program was given a passing grade by the European Union, enabling private-sector cross-border data flows on European citizens between the U.S. and Europe. Thousands of U.S. companies participate in Privacy Shield. They rely on the program to help collect, process and transfer responsibly information for more relevant advertising, human resources, and other commercial and operational purposes. (It applies to charities, too.)
European policymakers are transfixed with setting personal information controls on the private sector, and — beginning May 2018 — will give its citizens “default” power to shut down all such data usage for advertising purposes unless consumers provide affirmative consent. It’s called the General Data Protection Regulation (GDPR) and its companion ePrivacy Regulation.
In the U.S., much digital information about consumer devices and browsers — such as their browsing history and app usage — is painstakingly “anonymized” by companies according to industry-wide self-regulatory codes. [Disclosure: One of my clients is the Digital Advertising Alliance.] Sweat equity through independent accountability programs safeguard such data from being used without proper consumer notice (transparency) and opportunity to exercise control through an easy-to-find, easy-to-use “opt-out.” However, in Europe, any digital information that “could” be used to re-identify an individual — even if anonymized from a U.S. perspective, such as an IP address — is considered personal by definition. Affirmative consent — most likely an “opt-in” though “consent” details are yet to be articulated — will hold sway. Common U.S. notice-and-opt-out regimens won’t suffice.
Imagine all the responsible data flows — even those clearly beneficial to consumers and the global economy — that will simply stop May 25, 2018, in Europe because of a hugely stricter consent mandate. American companies can only watch and wait to see who may be called out by EU data protection authorities, eager to fine a company up to 4 percent of its global returns, as provided for in the law.
Good policy? Or good politics. In reality, EU lawmakers are asking its citizens to pay a huge price. And that’s not my opinion as an American — it’s a fact in a Europe-born study. Look at what’s at stake:
- €535 billion of the European Union economy benefits directly and indirectly from digital advertising;
- 66 percent of digital ad spend depends on data, and 90 percent of digital advertising growth depends on data;
- Ad units tied to data are 300 percent more valuable than standard run-of-network ads (because they are more effective)
That’s part of the economic argument. But there are social and political ramifications, too.
- Much like U.S. consumers, Europeans prefer data-supported ads to paying for content — eight in 10 report such a preference;
- Fully 68 percent say they would never pay for online content or use services such as email if they had to pay for it;
- And 92 percent would stop using their favorite site or app if they had to pay for it;
- Even 42 percent are “happy”: to see data used to deliver personalized ads.
European businesses, agencies and publishers have gone so far as to press policymakers that their respective countries’ own democratic and economic health is at stake — inherent in the power of data used in advertising:
- Up to 50 percent of advertising growth will simply disappear if data cannot be used to make more relevant ads;
- 70 percent of European citizens would abandon the Internet for news if they had to pay to replace the news content financed by digital advertising;
- Internet usage would crash by 88 percent if EU citizens were forced to pay for online content and services;
- And what of competition, diversity of content and innovation? The impact on small, independent publishers would be five times more pronounced than the impact on large media companies.
Yes, American companies are in the cross-hairs once GDPR and ePrivacy take some combination of enforcement effect next May — perhaps bad policy for seemingly good politics. Yet Europeans themselves are challenging such an objective — overreaching data controls punish consumers, employers and even democracies.
That’s a mindful lesson for all of us.