Tag Archive: GDPR

  1. Facebook’s woes show no sign of abating

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    A massive security breach is just the latest chapter in a bad year for the tech giant.

    After a bad year, Facebook needed to regain its users’ trust

    The fourth quarter of 2018 started at the beginning of this week, and there are probably few people who are looking forward to turning their backs on 2018 more than Mark Zuckerberg. This year has been something of an ‘annus horribilis’ for the Facebook CEO. Having perhaps thought that the worst was behind him with Russian interference in the US presidential campaign, the social media platform was hit with accusations that it had allowed Cambridge Analytica, a political consulting firm, to harvest data from up to 87 million Facebook users. Cambridge Analytica then used that data in the campaign that helped elect Donald Trump to the US presidency. This, along with the introduction of GDPR in the European Union, was blamed for Facebook losing daily active users in Europe, flatlining in North America and the resultant slow-down in revenue growth in Q2 of this year. The conclusion? Facebook needed to work on regaining its users’ trust in order to guarantee its future prosperity.

    And then, 50 million user accounts are hacked

    Unfortunately, things sometimes don’t go according to plan. Last week, Facebook discovered its most severe security breach to date, impacting 50 million user accounts. The ‘view as’ tool lets users understand their privacy settings: a bug allowed hackers to use this functionality to take over user accounts, meaning they could see everything in the user’s profile and, potentially, in any third party sites that users logged into with their Facebook accounts, for example Tinder, Airbnb and Spotify. Facebook acted to secure these accounts but the damage has been done: Zuckerberg said ‘I’m glad that we found this and were able to fix the vulnerability, but it is definitely an issue that it happened in the first place.’ What’s more, this is the second serious security breach for Facebook in recent months – in June, a bug made 14 million people’s private posts publicly viewable to anyone.

    A test of the EU’s GDPR

    While it is estimated that only 10% of users affected by this month’s breach were in the European Union, it is the EU that is the biggest headache for Facebook in this saga. GDPR requires companies that store the data of European citizens to declare any security breaches of this nature within 72 hours: Facebook notified the Irish Data Protection Commission which is now assessing whether it needs to carry out an enquiry. If it does, and Facebook is found to have been negligent in its duty of care for customer data, it could face a maximum fine of 4% of its annual global turnover – $1.63 billion. This is the first major test of GDPR, but the EU does have form for implementing large penalties to tech companies. It fined Google $2.8bn in 2017 for violating antitrust rules with its online shopping practices, and earlier this year slapped the tech giant with a $5 billion fine for abusing its power to force smartphone operators to pre-install Google search apps on any phone using the Android operating system.

    A battle on many fronts

    Facebook is under fire from many fronts – federal investigations into its privacy and data-sharing practices, the possibility of increased regulation from the US congress following high-profile hearings on the privacy practices of the big tech companies – and now this latest fiasco.

    Regain trust to keep advertisers

    The priority for Zuckerberg as he looks to 2019 and beyond must be to regain the trust of users around the world. Consumers are increasingly wary of the big tech companies and how they use their data, and if they start to log off in their droves, advertising dollars will follow them.

    Thumbnail image: Shutterstock

  2. The march of the tech titans on live sport

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    Facebook, Amazon, Google, Twitter and others are leveraging the power of live sports to help them grow.

    People are watching sport online

    The FIFA World Cup earlier this summer and other major sporting events have confirmed what everyone has long suspected: that an increasing number of fans are streaming matches online instead of watching them the more traditional way, on television. This is very good news for tech companies such as Amazon, Twitter, Google and Facebook who are looking to leverage the passion of live sport viewers and its appointment-to-view nature as a way of reaching new users and increasing ROI on existing ones.

    Facebook has been looking for ways to super charge its growth

    Facebook in particular has upped its live sports game, aggressively pursuing the rights to air football and other sports across the world. At the end of June, the social network announced disappointing results for the second quarter: this was in part down to issues surrounding GDPR in Europe and the Cambridge Analytica scandal, but also, ironically, due to Facebook’s huge success – it has reached near-saturation point in mature markets in North America and Europe. Its future growth strategy therefore relies on two things: increasing revenue on each existing user in these mature markets, and attracting more users in countries where Facebook is less ubiquitous, particularly Asia and Latin America.

    The answer: live football

    The latter part of the strategy is already well underway, with live sports playing a key role – this was evident when they hired Eurosports CEO Peter Hutton to lead the push. Last week, it was announced that La Liga had signed an exclusive three-year deal with Facebook to live stream all its 380 matches for free to Facebook users in India, Pakistan, Bangladesh, Sri Lanka, Afghanistan, Bhutan, Nepal and the Maldives. The platform has 348 million users across these markets, with 270 million of those in India. India is a key growth market for Facebook: it already has the largest Facebook user base in the world (270 million versus the US’s 210 million) but, with a population of around 1.3 billion and a projected 500 million internet users by the end of this year, there is huge room for growth for Facebook. Increasing smartphone penetration, relatively affordable mobile data and a passionate football fanbase means that the La Liga deal is a smart move from the platform. This move is in addition to Facebook’s plans to roll out its video platform, Watch, into India – it’s currently only available in the US.

    La Liga isn’t Facebook’s only move into live football streaming: just a few days after the La Liga announcement, UEFA confirmed that Facebook had bought the media rights for certain Champions League live matches in Spanish-speaking Latin America for the

    2018-2021 cycle. The matches they have the rights to include the final and Super Cup games, and the number of top international players involved in the tournament means that it is a huge deal across the continent.

    Other tech companies are also snapping up live sports rights

    Facebook’s activities in the live sports space are matched by its competitors’: Amazon in particular has been signing deals to attract more customers to its Prime platform, including a five-year deal for the exclusive broadcast rights of the US Open tennis tournament in the UK, the rights to screen 20 Premier League football games each season, also in the UK, from 2019 to 2022 and streaming rights for Thursday night NFL games in the US. Meanwhile, Twitter works closely with the NBA, partnering with them to help people keep up with the latest news and developments and watch the games, no matter where they are. YouTube has the rights to Major League Soccer games, including the Seattle Sounders and Los Angeles FC, for which it has both streaming and broadcast rights.

    The future of live sport and entertainment looks dramatically different

    There are concerns amongst consumers, particularly in India, that slow broadband speeds will affect their enjoyment of games, and that it will take something away from the camaraderie of watching games as a group on television. This is perhaps mitigated somewhat by the fact that the games will be free to view. From an industry perspective the arrival of tech platforms on the live sports scene is a seismic shift. For advertisers, concern about TV live sports strategies being adversely affected will surely be offset by the huge opportunities presented by delivering targeted ads to passionate sports fans in real-time. For the major players in broadcasting space, it is the fear of the existential threat that this precise situation causes that has led them to rethink and overhaul how they operate; this has led to some of the huge mergers we have seen recently, including the AT&T takeover of Time Warner and Disney’s deal to purchase 21st century Fox’s film and television assets, which was recently approved by shareholders.

    There can be no denying that the media and technology industries are converging at breath-taking speed, and that the landscape will look very different, very soon. Agility and a willingness to innovate and take calculated risks will be the ways to succeed as this transformation takes place.

    Thumbnail image: Shutterstock.com

  3. Why can Google do no wrong?

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    While fellow tech companies showed signs of wear and tear in second quarter reports, Google is going from strength to strength. Why?

    A sector under scrutiny

    As technology becomes more and more integral to our everyday lives, and we rely on it for everything from keeping in touch with friends and consuming news to running our businesses and monitoring our health, so we have started to question the tech companies more – as consumers and as brands. How they handle data has become of particular concern, leading the European Union to implement the infamous GDPR legislation. Many have come under fire, both in the courts of law and in the court of public opinion: the financial ramifications were evident in Facebook’s second quarter reports, and Snapchat and Twitter suffered too. All three social networks lost users in the wake of GDPR, while the Cambridge Analytica scandal was particularly painful for Facebook.

    Google is thriving

    So where’s Google in all of this? More than 86% of internet searches are carried out on Google and it handles a vast quantity of consumer data, so it would be unsurprising if they too had been affected by negative sentiment and distrust. However, if parent company Alphabet’s second quarter reports are anything to go by, they have not just weathered the storm, they are positively thriving. Thanks to better-than-expected earnings ($11.75 per share versus the $9.59 projected by analysts) and revenue ($32.66 billion versus the $32.17 billion estimate), Alphabet’s share price soared by 5% in after-hours trading, settling at an increase of 3.2%.

    A bleak future for TV?

    Indeed, you could be forgiven for believing that the growth of mobile means a bleak future for linear TV. The young, mobile generation are increasingly tending to stream video content instead of watching traditional linear TV, and often do so on a mobile device. Many tech companies have noted this and are acting upon it: in June, CBS announced that it will be streaming NFL games on mobile devices from this autumn, while, shortly after closing their acquisition of Time Warner, AT&T announced the launch of their new mobile streaming service, Watch TV. These services will no doubt be popular, thanks in part to the smaller ad load for content streamed on a mobile.

    This remarkable success was in spite of the issues surrounding GDPR in the European Union, YouTube’s brand safety scandals, a $5 billion fine from the EU for competition abuses and condemnation following reports that Google will in effect be supporting state sponsorship by launching a mobile search app in China that will allow blacklisted content to be blocked. So how is Google doing it?

    Resilience lies in diversity

    Resilience often lies in diversity and, as we mentioned in our blog about Facebook’s woes a few weeks ago, Alphabet’s revenue is less heavily reliant on advertising

    than its competitors’. While a massive $28 billion of its second quarter revenue was from Google’s advertising business, that wasn’t the only revenue source. Google’s other revenues, such as its cloud services, hardware and app sales grew by 37% to $4.4 billion. By contrast, 98% of Facebook’s Q2 revenue was from advertising, and this will become increasingly difficult to grow as it reaches saturation in many mature markets in North America and Europe. Furthermore, Google has an impressive seven billion-user products – Search, Gmail, Chrome, Maps, YouTube, Google Play Store and Android; YouTube in particular has enjoyed strong growth recently, meaning that Google doesn’t rely solely on Search for ad revenues. That said, it should be noted that YouTube (and other video ads) are still under scrutiny for shortcomings in terms of measurement – a mere just one second of viewing is defined as ‘seen’ – and in terms of the quality of material the ads are shown in. What’s more, brands and agencies still need to work out a creative format for video success: currently, many video ads are simply replicas of TV ads and not optimised for the channel, meaning they are not as efficient as they could be. The search business, by contrast, is much more stable, comparable as it is to the telephone books of yesteryear: if your business isn’t there, it may as well not exist.

    Looking towards the future with ‘Other Bets’

    While Google will without doubt remain a highly profitable business for Alphabet, Alphabet isn’t putting all its eggs in one basket. The new corporate structure has separated the core Google business from the more experimental companies, known collectively as ‘Other Bets’, which collectively brought in $145 million in revenue in quarter 2. These include healthcare projects, venture capital, internet providers, a think tank, driverless cars and an AI research lab, among others. While they represent a small percentage of Alphabet’s huge turnover and are currently loss-making, only one or two need to make it big to make Alphabet’s success even more stratospheric. The favourite for huge potential is Waymo, a self-driving car business which plans to launch a commercial ride-hailing service by the end of this year. In June Morgan Stanley estimated that Waymo could be worth $175 billion in the next few decades.

    The very existence of this ‘Other Bets’ strategy is a demonstration of Alphabet’s commitment to diversifying their offering and their investment in the future – and we believe that it is this approach, this mindset, that will continue to make them an attractive partner for brands and a safe bet for investors for years to come. And that is why they’re rapidly approaching the trillion dollar mark.

    Thumbnail image: MariaX/Shutterstock.com

  4. What’s Facebook’s problem?

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    For years, Facebook has been the darling of the tech and media worlds. Is the inevitable conclusion of its latest quarterly report that its star is fading?

    The unstoppable rise of Facebook – until now

    For many years, Facebook seemed unstoppable, unbeatable. Since its beginnings in Mark Zuckerberg’s dorm room in Harvard University, it has grown into a technology behemoth with 1.47 billion daily active users and 2.23 billion monthly active users. Facebook has very efficiently monetised these users’ data, with advertisers flocking to Facebook and contributing to a company value of over $500 billion, and to Zuckerberg’s personal fortune of around $70 billion. But it is Facebook’s handling of its users’ data that seems to be at the root of its recent reversal in fortune.

    What went wrong?

    Facebook’s sheen started dimming two years ago, when it was first implicated in fake news and political meddling. This didn’t seem to have any impact financially until its second quarter 2018 report last week, which made for painful reading for its investors. The report disclosed that the number of users in Europe dropped by 3 million, ending its nine-year streak of quarter-on-quarter growth in numbers of European users (note that this was for Facebook only, and not its other owned properties such as Instagram, WhatsApp and Oculus), and user growth in North America flattened. It gained just 22 million users worldwide in quarter 2 (largely in Asia), less than half of the quarter 1 figure. Worse, in the eyes of investors, was that it missed revenue forecasts for the quarter, bringing in $13.2 billion versus the $13.4 billion that analysts had projected. All this led to $120 billion being drained from Facebook’s value and a 20% decrease in stock price in after-hours trading on Wall Street, as investors were spooked further by Facebook’s predictions that its revenue growth would continue to decelerate.

    Scandals, data, addiction and saturation

    With the problems that have beset Facebook over the last few years, it was perhaps inevitable that this point would come. The first and perhaps most serious headaches for its leadership have been the twin issues of political interference – notably in the US presidential election and the UK’s Brexit referendum – and fake news. This culminated in the Cambridge Analytica scandal of earlier this year. Facebook was fined $656,000 – the maximum possible – for breaching UK data protection act, but has had to spend much more to offset the negative press. It exacerbated Facebook’s increasingly toxic reputation as a company that interferes in and affects society and politics, and it is likely that many users deleted their accounts in disgust, particularly in the UK where Cambridge Analytica was based.

    Another challenge for Facebook this year has been the implementation of GDPR in the EU, which set guidelines for the collection and processing of the personal information of individuals within the European Union. It is believed that GDPR was directly responsible for the loss of 1 million of Facebook’s monthly active users in the EU, with many possibly choosing to opt out instead of confirming assent to Facebook’s new data collection practices.

    Facebook, as with all media largely consumed via mobile phones, has of course been affected by the growing concern among consumers of the effect that spending a lot of time on smartphones and social media is having on their mental health and concentration. Across the world people are choosing to cut down on the amount of time they spend on their phones.

    Scandals, data protection and switching off aside, it may be that saturation is Facebook’s most serious long-term issue. Of the 3.5 billion internet users globally, 2.5 billion use at least on Facebook app, which means that user growth in many places, especially in mature markets, has naturally stagnated – there simply aren’t many people who don’t use Facebook, at least occasionally. This means that the business model must focus on increasing revenue per user, which Facebook has struggled with – newer initiatives such as Stories (Facebook’s answer to Snapchat) have proven difficult to monetise compared to the Newsfeed. And compared to Google’s parent company Alphabet, Facebook appears to be over-reliant on ad revenue: $13 billion – over 98% of its overall second quarter revenue of $13.2 billion – was from advertising, compared to 86% of Alphabet’s. This is thanks to Alphabet’s more diversified product offering, which includes hardware, the Google Play Store and Cloud services that are non-ad revenue. This discrepancy could be part of the reason that Google appears more resilient than Facebook, despite the fact that its record isn’t squeaky clean either.

    All is not as gloomy as it seems

    Despite the recent doom and gloom around Facebook’s latest financial reporting, the future isn’t too bleak for the social network. While the financial and user growth figures didn’t meet investors’ expectations, they’re still extremely healthy, particularly considering the storms that it has had to weather. The furore around its Q2 report is rooted in the fact that its growth has slowed, rather than in any actual crisis. Facebook has announced that it is investing billions into safety and security initiatives; these will future-proof the company but do eat into profit margins in the shorter term. Perhaps Facebook’s real problem is that it has been the subject of – and purveyor of – too much optimism and exuberance in recent years: it’s now time for it to settle down and accept its responsibilities as one of the world’s major technology companies.

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