EU’s New Data Rules Expected by Pivotal Research to Be Slightly Negative for Facebook, Alphabet, Snap, Twitter

The European Union’s General Data Protection Regulation set to go into effect in May was initially viewed by Pivotal Research Group as “marginally positive” for Facebook (FB) and Alphabet’s (GOOGL) Google, but the firm said in a Monday note that after further research, it now views the new regulation “slightly negatively” for the social-technology companies as well as Snap (SNAP) and Twitter (TWTR).

The General Data Protection Regulation, or GDPR, aims to protect EU citizens from privacy and data breaches. The regulation includes strengthened conditions for consent and rights to access as well as erase personal data. Its jurisdiction differs from previous regulation in the EU as it applies to all companies processing the personal data of data subjects residing in the EU, regardless of the company’s physical location.

“Implementing GDPR-compliant ad products may impact revenue growth primarily because it may require more ad inventory to satisfy advertiser goals,” Pivotal said to clients in a Monday note. However, the firm said it is still “mindful of the potential benefits GDPR may bring to panel-based measurement services,” noting “different conclusions may form as expectations evolve around the new data regime.”

Pivotal noted EU-based advertising activities account for around 30% of Alphabet’s revenue, 25% of Facebook’s, 20% of Twitter’s and could approach 15% for Snap this year. “With implementation of GDPR scheduled for May 2018, these activities would face risks if left unchanged,” the firm said, noting “GDPR is intended to enhance consumers’ rights with respect to their personal data, and is intended to have a meaningful effect on how data is used in digital advertising as a result.”

The firm said GDPR could impact how inventory is managed and how ads are priced. For example, if under GDPR the publisher secures consent that only allows the data to be used in a less targeted way than currently, “perhaps it takes twice as much inventory to find the same audience,” Pivotal said.

Still, the firm also noted publishers “may find new ways to target audiences without using personal data, and its definition may yet evolve.” It added: “While the specific outcomes remain dependent upon the ways in which media owners interpret the regulation and the actions consumers take in response, we continue to view GDPR as a potentially significant change to digital advertising in Europe that global investors should continue to monitor.”

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