It may not have got a huge amount of coverage in the US, but
a decision this week by German regulators could represent a major threat to Facebook’s
advertising model.
Germany’s Federal Cartel Office (FCO) delivered the latest in
what seems to be a weekly rash of bureaucratic, legal and reputational assaults
against the company and some of its peers. But this week's bad news could have a more profound long term impact than most.
The antitrust regulator of Europe’s largest national market
ruled that Facebook was exploiting its users by requiring them to agree to wholesale
data collection just to have an account on the platform. The FCO ruling now
prohibits that practice with any German-based consumer.
But what will this mean for Facebook’s advertising business?
Certainly, the model relies on recording the activities of its nearly one
billion account holders across the Facebook platform, as well as on WhatsApp and
Instagram. The company collects data on where people shop, what their tastes
and preferences are and what other information and data they consume. All of
the data is then combined to create a comprehensive user profile.
For several years now, critics of Facebook have charged that
the company is not open enough about the data that it collects and how it uses
it. The Cambridge Analytica scandal of 2018 only brought this already burgeoning
critique of Facebook to a mass audience.
The company, for its part, has maintained that it needs to
collect this kind of data to offer a “free” service and to tailor ads and other
content to individual users.
But Germany’s ruling is a hammer blow and a milestone. For
the first time, a powerful regulator in one of the world’s most important developed
economies has sided with the privacy argument.
The value of Facebook’s German advertising business just fell
off a cliff.
Governments and anti-Facebook activists in many other
countries will have taken note.
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