The Cambridge Analytica scandal is still hot and the European General Data Protection Regulation (GDPR) is upon us. But Facebook, Google & C. keep doing great. Here we report quarterly data and the value perceived by users.
In the aftermath of the Cambridge Analytica case, quite a few were quick to predict the decline of Facebook and other companies that thrive on the accumulation of their users’ personal data. “Nothing will be more like before” was written. Or even: “Facebook at the end of the line”, “The escape from Facebook has begun” and so even more eccentric dramatization. In the background, the imminent application of the GDPR, the European Union regulation on the protection of personal data. Which, according to some, is already taking sleep from Mark Zuckerberg, Sundar Pichai, and Jeff Bezos.
Techlash and GDPR
“It’s the big techlash”, was being cried. The Economist was the first to write it in an editorial last January, in which, with a very British irony, the end of the honeymoon between Silicon Valley and the governments of half the globe is foretold. Then came the Zuckerberg’s mea culpa before the American Congress, it was said that some new regulation and everything would be back more or less as before. Of course, on 25 May the GDPR will enter into effect throughout the EU. But are we sure that the new regulatory framework will really put those giants into a corner? According to the New York Times the opposite is true: strict European regulation will help historical operators. The cost for obtaining permission from users for the use of personal data will prove to be much higher for a young company than for an already established company.
The truth is that, in this historical phase, there are two forces faster than any regulation: technology on the one hand, and the need for narcissistic gratification of online users on the other. Both of these work in favor of the big names on the web. Consumers do not seem willing to give up the so-called free digital goods offered by Google, Facebook and Amazon. On the contrary, they are eager to take advantage of the new services that technological evolution will make available in the future.
The perceived value of online services
It may strike us, in this sense, the results of the investigation Using Massive Online Choice Experiments to Measure Changes in Well-being, created by Erik Brynjolfsson, Avi Gannamaneni, and Felix Eggers on behalf of MIT Initiative on Digital Economy.
The study is based on the contingent valuation method (choice experiment) and was conducted on a massive sample of online users. Those users were asked to express preferences, choosing between different alternatives of goods and economic values. The subjects stated that, rather than giving up access to search engines, they would agree to accept a decrease of their annual income of $17,000. Similarly, in order to keep using e-mail, they would be willing to sacrifice over $8,000. The social media opportunity cost ($322) is more limited, but it is growing significantly compared to previous year.
Dream quarterly for Facebook, Alphabet, and Amazon
So, just to disprove the prophets of doom, we get the excellent results of Facebook’s first quarterly 2018. A quarterly report where apparently none of Russiagate, Cambridge Analytica or fake news problems have left any trace. In the first quarter, in fact, Facebook’s profits reached $4.99 billion ($1.69 per share, compared to the predicted 1.35 and the 1.04 of the previous year). Advertising revenue (11.8 billion dollars) and the number of users also grew by 50%. Thanks to 70 million new arrivals, Facebook’s population now has 2.2 billion subscribers.
Results above expectations also for Alphabet, that, with profits in the first quarter of 2018 up 73% to $9.4 billion, scored the best performance since the end of 2009. The revenues are also good: 31.15 billion dollars, up 26% compared to the same period of 2017 and higher than the 30.29 billion budgeted by the company. Advertising sales – Alphabet’s leading business – grew by 24% to 26.64 billion dollars.
Finally, even Amazon started 2018 big. The first quarter closed with revenues of $51.04 billion: better result over the last five years. The increase is 43% compared to €35.71 billion in the first quarter of 2017. Profit per share also rose sharply, equal to $ 3.27. The performance of the AWS division (cloud services) was significant: revenues rose by 49% to $5.44 billion, while operating profits increased by 57% to $ 1.4 billion.
So what, then?
Business as usual. Almost. Actually, something will change or maybe it’s already changing, in the behavior of the big names on the web. Apart from the adaptation to the new framework imposed by the GDPR (which is, anyway, a fact), the real question was posed by Vincenzo Cosenza in a post dated 9 April :
“Zuckerberg’s mistake was to open up the platform APIs to independent developers, until 2014, which in some cases abused this possibility, coming to build profiles to be used for marketing purposes (also political), not allowed by the terms of service.”
The changes, therefore, will mainly concern this aspect. Facebook and Instagram are limiting the access of user data to third-party developers. And these limitations will be imposed regardless of the users’ consent.