The European Union recently proposed a new data-protection law that includes the controversial “right to be forgotten” – a consumer protection regulation which states, under the premise that data belongs to the individual, that people shall have the right to have data stored about them deleted if there are no legitimate grounds for retaining it.
If this regulation gained international popularity, it could force many of today’s most successful enterprises to change some of their core business practices. Increasingly, one of the most valuable assets that a modern technology company possesses is its ever-expanding cache of data collected about its users. This data compiles over time into an increasingly accurate representation of who those users are and what they like. It is then used to influence new content and features and to target high-quality and effective advertising.
Google Inc (NASDAQ:GOOG)
Google Inc (NASDAQ:GOOG) collects and stores more user data than almost any other company out there. For many people, Google is the sole provider of nearly all web searches, video searches, mobile searches, email communications, GPS activity, web browser services, and all cellular communications and mobile experiences.
Google Inc (NASDAQ:GOOG) has generated big money from the “business of knowing.” In fact, Google shares recently hit an all-time high after announcing in January that it had earned an astonishing $50 billion in annual revenue for the year of 2012 – the majority of that from online advertising. But, what is it about Google Inc (NASDAQ:GOOG) that lets it consistently and absolutely dominate these important slices of the internet – even though they seem to have such a low barrier of entry for competition?
The data.
Google Inc (NASDAQ:GOOG) knows everything that anybody has ever done while on its services. This data allows them to build popular features, new products, and (maybe most importantly) make more money per advertisement than any of its competitors. However, if it’s decided that this data actually belongs to the user, not only would Google and its competitors have to comply with user demands that every bit of data the company has ever collected about them be deleted, but users could also demand that all of their data be transferred to a competing service before deletion.
This could have a serious impact on Google’s business – changing the way they improve products and structure privacy policies while lowering the barrier of entry for many new competitors.
Google shares are up 12% year-to-date, and up 31% over the last 12 months.
Facebook Inc (NASDAQ:FB)
Facebook Inc (NASDAQ:FB) remembers the time you did that one thing. You know what I’m talking about. That one thing. It remembers the embarrassing 2AM messages you sent about it. It even remembers those ridiculous posts about it that you eventually deleted.
In fact, there’s no company in the world that knows you like Facebook does. It gets a glimpse of the real you. And it’s not just you – it also knows all of your friends, family, and practically everybody in your community! It relies on compiling small bits of information from what you do and say to serve you with high-quality targeted advertising.
With more than one billion active monthly users, Facebook’s reservoir of posts, comments, likes, pokes, messages, and pictures is the largest collection of self-published thoughts, opinions, and human interactions ever assembled. Like Google, this data gives Facebook an incredible advantage over the competition.
Users can already remove themselves from the enormous social network, but they can’t yet take all of their information and data (posts, pictures, likes, comments, and all other historic activity) to a brand new competitor. If users were allowed to do this, Facebook would be forced to keep them incredibly satisfied with their privacy policies or potentially face a mass exodus to a competing service.
Facebook shares are up 6% year-to-date, and down 25% since its May 2012 IPO.
Microsoft Corporation (NASDAQ:MSFT)
When considering companies that may know too much about you, most people forget about Microsoft. Via the Windows operating system and the Internet Explorer web browser, Microsoft Corporation (NASDAQ:MSFT) collects a wide variety of consumer information, including which applications are used, how the applications are being used, what programs are downloaded and installed, what hardware a computer has, what a user does on the internet, and frequently where a consumer is located.
Microsoft uses this information to detect errors in its software and to create updates and new features based off of the user’s experience. Out of the companies mentioned in this article, Microsoft has the longest history of collecting data on its users – dating back to before Windows 95 and the original Internet Explorer web browser were launched.
Additionally, Microsoft is diving deeper into the “business of knowing” with its launch of Windows 8, Windows Phone 8, and the Surface tablet. With its vision of a future of one compatible operating system across all devices, Microsoft is posed to collect more user information than ever before. Competitors would certainly be excited to have the opportunity to possess this data when they win over a new customer.
Microsoft shares are up 5% year-to-date, and down 10% over the past 12 months.
In Summary
Consumers and governments around the world are paying more and more attention to how businesses collect and store data, what they do with the data, and what rights the individual has over data collected about them. Right now, companies have almost all of the power in this relationship, leaving many consumers and governments frustrated with the lack of transparency and control. In the coming years, many laws will be proposed to strike a harmonious balance between the companies that collect this data and the users that provide it. These laws could have serious implications for the companies mentioned in this article.
As always, this is by no means an endorsement of any stock or advice to buy or sell any stock. My goal is simply to educate, amuse, and enrich. Good luck to all of you! And thanks for reading.
The article The Right to Be Forgotten originally appeared on Fool.com and is written by Nathan Bradham.
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