European data revisions estimated to decrease annual social media advertising expenses by 400 million euros
In a blog post earlier this week, Jitender Miglani, an analyst from Forrester Research, predicted a significant decrease in social media spending due to stricter data privacy laws in the European Union. The specific EU data protection rules, proposed in 2016 and embedded in the General Data Protection Regulation (GDPR) and related laws, could potentially reduce social media spending by approximately €400 million annually.
These rules aim to enhance transparency, privacy, and data protection, particularly affecting how political advertising and targeted ads operate on social media platforms. Strict transparency requirements ensure users know who is sponsoring ads and how data is used. Limits on personal data usage for ad targeting require explicit user consent, reducing the possibilities for broad data-driven targeting, a practice social media advertising heavily relies on.
Enhanced user rights to data protection reduce the volume and precision of data available for ad targeting, increasing costs for advertisers who must spend more to reach audiences effectively or change strategies. Regulatory burdens also increase compliance costs for social media companies, such as obligations to report and remove illegal content, which may indirectly affect ad targeting and service costs.
The 2016 proposals laid the groundwork for GDPR enforcement starting in 2018, officially mandating data minimization, data protection by design, and strong penalties for non-compliance. These factors together pressure social media companies to reduce invasive ad targeting practices.
The growth in social media spending in Western Europe, driven by the shift from traditional to online media, social media's growing share of total marketing spend, the continued growth in social media adoption, and the proliferation of devices with which to access social networks, may be offset by these stricter data protection rules. However, Forrester's study predicts 'double-digit' growth in social media spending in Western Europe, reaching €3.2 billion in 2017, despite EU regulations.
It is important to note that Forrester's prediction does not account for potential changes in the reforms before they are enacted. The European Parliament is currently debating these data protection reforms, and the exact amount of the annual loss could vary depending on the specifics of the enacted data protection reforms. One of the rules proposed in these reforms is the 'right to be forgotten', which would force social network operators to delete data about an individual on request.
In summary, the core element of the 2016 EU data protection proposals impacting social media spending is the imposition of strict user data protection rules that limit data-driven advertising, thereby increasing compliance costs and reducing the efficiency of targeted advertising campaigns across social media platforms. This leads advertisers to spend less on such ads within the EU.
- The stricter data privacy laws in the European Union, such as the General Data Protection Regulation (GDPR), could potentially have an impact on finance, as they aim to limit the use of personal data for ad targeting in business, increasing costs for advertisers and potentially reducing social media spending.
- The European Parliament's ongoing debate about data protection reforms, which includes the 'right to be forgotten' rule, could further influence technology, specifically social media platforms, as it could force operators to update their systems to delete data on request, potentially altering the efficiency of targeted advertising campaigns and subsequent spending patterns in the EU.
