EU privacy proposal could dent Facebook, Gmail ad revenue
Online messaging services such as WhatsApp (FB.O), iMessage (AAPL.O) and Gmail (GOOGL.O) will face tough rules on how they
can track users under a proposal presented by the European Union executive on
Tuesday which may hit advertising revenue.The web players will have to guarantee the
confidentiality of their customers' conversations and get their consent before
tracking them online to serve them personalized ads.For example, email services such as Gmail and Hotmail will not
be able to scan customers' emails to serve them targeted ads without getting
their explicit agreement.Most free online services rely on advertising to fund
themselves, raising fears that Tuesday's proposal could reduce that revenue
stream.The proposal by the European Commission extends some rules
that now only apply to telecom operators to web companies offering calls and
messages using the internet, known as "Over-The-Top" (OTT) services,
seeking to close a perceived regulatory gap between the telecoms industry and
mainly U.S. Internet giants such as Facebook, Google and Microsoft (MSFT.O).It would allow telecom companies to use customer metadata -
such as the duration and location of calls - to provide additional services and
make more money, something they are barred from doing under the current rules.The review of the so-called e-privacy law will also require
web browsers to ask users upon installation whether they want to allow websites
to place cookies on their browsers. A previous leaked version would have forced
browsers to set the default settings as not allowing cookies."It's up to our people to say yes or no," said
Andrus Ansip, Commission vice-president for the digital single market.Cookies are placed on web surfers' computers and contain bits
of information about the user, such as what other sites they have visited or
where they are logging in from. They are widely used by companies to deliver
targeted ads to users.Online advertisers have warned that overly strict rules would
undermine many websites' ability to fund themselves and keep offering free
services. They say the data they use can not identify the user and is therefore
low risk, making asking for consent every time too onerous."It will particularly hit those companies that ... find
it most difficult to talk directly to end users and what I mean by that is tech
companies that operate in the background and sort of facilitate the buying and
selling of advertising rather than the ones that the user directly engages
with," said Yves Schwarzbart, head of policy and regulatory affairs at the
Internet Advertising Bureau (IAB).Online advertising generates 10 billion pounds ($12.16 billion)
of revenue for publishers and content creators in the UK alone, according to
the IAB.Companies falling foul of the new law will face fines of up
to 4 percent of their global turnover, in line with a separate data protection
law set to enter into force in 2018.The proposal will need to be approved by the European
Parliament and member states before becoming law.(Additional reporting by Esha Vaish in Bangalore;
Editing by Alison Williams)
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