Digital field may be first trade wars battleground
The survey showed that three-quarters of citizens believe that internet service providers such as Google and Facebook should not have the right to prevent access to their services if users refuse to store identifiers, such as cookies, on their equipment.
There has been a wide practice of locating cookies which track computer users’ preferences and activities, without their consent or knowledge. Popular browsers like Netscape and Microsoft Internet Explorer placed them anonymously for years without alerting users. More recent practices, to put the onus on users to opt out, are equally invasive of privacy and data protection.
However, three-quarters of industry, on the other hand, disagree.
Online advertisers, in particular, say the proposals would upset the entire business model of the internet.
The commission when it launched its Digital Single Market Strategy two years ago, which included the adoption of the general data protection regulation, was aware there was a danger the privacy of internet users could be abused.
It led to an e-privacy directive review, which was aimed at reinforcing trust and security in digital services in the EU. The focus was on ensuring a high level of protection for citizens and a level playing field for all market players.
Based on the consultation across EU states, the commission is now ready to issue a new legislative proposal on e-privacy.
Without prejudice to the outcome of the evaluation, several policy issues have already emerged as key issues to be addressed in the review of the e-privacy directive.
These include the need for new privacy rules on how internet platforms such as Google, Facebook and its WhatsApp subsidiary, and Microsoft and its Skype subsidiary track people online and then offer to target advertising to businesses.
New rules are expected that will compel website and browser owners to gain the assent of users before bombarding them with advertising based on the profiles they have built up of these users.
The commission is also probing the revenue that these internet platform owners derive from selling citizens’ profiles to companies who wish to sell goods and services, both online and in the high street.
The commission is understood to be planning to introduce penalties for any breaches of the new e-privacy rules, including fines of 4% to 10% of the advertiser’s revenue.
The move is considered by industry insiders as part of a wider attempt by Brussels to rein in big Silicon Valley corporations and their tax avoidance practices in Europe.
It has already launched antitrust probes into Google and has, of course, ordered the Irish Government to collect €13bn in back taxes from Apple.
In Google’s case, any fine could cost up to €6bn on current market sales and €2bn for Facebook.
It may mean heftier fines if the commission were to push for a multi-year settlement, as it has done in the Apple case.
While Google still controls about a third of the roughly $187bn (€177.6bn) worldwide digital advertising market, Facebook’s market share has risen rapidly in recent years, to 12%, according to global research firm e-Marketer.
More than half of Google’s searches now come on mobile devices, and some analysts estimate more than half of its revenue comes from mobile.
Advertisers’ spending on mobile search ads increased by over 50% in 2015, while overall search ad spending rose just 10%. Google also pays Apple to make Google the default search engine on iPhones, which gives it top billing on more than 1bn devices.
The commission’s anti-trust probe clearly has this cosy arrangement in its sights. Google said it is now reaping the rewards from the shift to mobile because companies are increasingly willing to advertise on smartphones.
That is in part because Google is adding new mobile ad formats and is better measuring the efficacy of such ads, including tracking users’ locations to see if they visit a physical store after seeing an ad for the store on their phones.
However, the drive to improve the privacy rights of citizens is not welcome news to the many businesses that have come to rely on internet advertising to drive customers to buy their products.
The internet has become an essential component of international business facilitating communication across the globe between advertisers, sellers, and customers. More specifically, websites have become customers’ first port of call for seeking information and eventually purchasing goods or services, whether online or offline.
Consequently, businesses are increasing their presence on the internet and improving their advertising practices so that current and prospective customers receive ads with content that is relevant and meaningful to them.
Separately, the commission’s statistics office Euro-stat release showed that most EU businesses have a website and one out of four used internet advertising in 2016.
In Ireland and across the EU companies have been lobbying for continued ease of access and use of citizens data. As can be expected, companies who run their marketing campaigns on the internet use targeted advertisement methods that increase the likelihood of their promotional marketing messages reaching the right audience. They want to see continued and untethered use of internet advertising.
Interestingly, the survey showed that internet advertising was not only used by companies that sell to consumers online. In fact, it is mostly used by companies selling offline.
Businesses liked targeted internet advertising to use information from the content of the web pages viewed by internet users. Other than Airbnb, more than half of EU businesses providing accommodation services used internet ads.
Contextual advertising was the most common form of internet advertising which was based on information about users’ past browsing activities recorded by cookies.
The digital trace of users’ activities on the internet over time is an important source of information on interests, preferences, and shopping activities.
Businesses use this information to determine whether an internet user belongs to a specific target audience, subsequently sending internet ads matching the user’s profile.
Browsers providing geolocation services are pushing the envelope further, essentially attempting to locate users’ IP address, wifi, or network location.
Internet users’ geographic location such as the country, region, city, and often zip code provide useful information for targeting suitable advertisements, for example about restaurants nearby.
The use of geo-targeting advertising can be combined with using contextual advertising or behavioural targeting to further identify needs of a potential customer.
Some three-quarters of EU businesses advertising on the internet used information from the content of internet surfers’ web pages or keywords from their queries to identify the audience accurately before sending relevant ads, according to the EU research.
The Eurostat release also showed businesses in Ireland are top of the league in using (at two-thirds of all businesses) social media to reach customers.
This is well above the EU average of 45%, and seems to indicate an early willingness to use social media to build their image and that of their products among the younger end of the consumer market.
Ireland also features in the top echelon, with a third of companies using the internet for advertising of their products and services.
Any attempts by the commission to rein in the expansion of US technology corporations is likely to further trouble the administration of president-elect Donald Trump. He had told executives from Silicon Valley’s most prominent companies that he was “here to help you folks do well”.
Opening his first meeting with the technology industry at Trump Tower in New York last month, Mr Trump told the heads of companies including Apple, Google, and Amazon he stood ready to do “anything we can” to help them, despite potential divisions with Silicon Valley over issues including encryption, imports, and immigration.
He went on to say: “We are going to make it a lot easier for you to trade across borders.”
There is no question that businesses in Europe and the US will agree with this sentiment. However, there is the question of the location where the super profits of the digital world should be declared.
There is an urgent need to ensure that citizens’ privacy is protected in legislation. The digital field may be the first battleground for the trade wars Mr Trump had threatened during his election campaign.
