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California continues to lead the way with new Internet privacy legislation, with the latest piece of legislation on schedule to be signed into law. This new California law – the California Privacy Rights and Enforcement Act of 2020 (CPRA) – will become the toughest piece of legislation yet when it comes to personal privacy and will likely become the basis for other Internet privacy legislation introduced by other states around the nation.
Simply put, the new CPRA will make it almost impossible for companies to share sensitive personal data (such as data about race, religion, and health) with third parties without the consent of the consumer. And it will also restrict the ability of social media companies to share geolocation data with third parties. That’s a huge move with regard to the biggest social media companies, all of which depend on sharing and exchanging data with advertisers. Not surprisingly, companies like Google and Facebook are not fans of the proposed privacy law.
A new business model for social media
The new California privacy law will shake up the current advertising-based business model within the social media world. As most Facebook users must realize by now, their personal data is being bought and sold over and over again in order to deliver targeted ads. The reason why big advertisers love to buy ads on social media is because they can get access to exactly the types of people who are most likely to buy their products. And if they get access to geolocation data, then they can serve up those ads to people in certain locations at certain times.
Thus, if a company such as Facebook can’t share consumer data with a potential advertiser, that is going to have huge implications for the current business model in the social media world. Doesn’t it make sense that advertisers will begin to look elsewhere if advertising on social media starts to look a lot more like advertising on TV or radio? Sure, Facebook might be able to deliver a huge audience, but the real selling point of Facebook is the ability to deliver a very segmented user audience according to certain demographic, behavioral or psychographic factors.
A shift to subscription-based services?
So what would a new business model for social media look like? Many have suggested that the next move will be a shift to subscription-based social media services. Just as you pay a few bucks per month for your Netflix subscription, you’d pay a similar amount for your “Facebook subscription.” By paying even more each month, you might be able to get rid of some ads in your newsfeeds or get access to “premium” content produced by certain Facebook users. Think about the way that YouTube offers several different alternatives for users. Most people use the “free” version of YouTube, but plenty of others sign up for ad-free versions of YouTube or premium content versions of YouTube (such as Red). Why couldn’t Facebook roll out a similar type of offering?
The end of the Google/Facebook duopoly
One thing is clear – the new California privacy law will likely signal the end of the Google/Facebook duopoly in the social media world. Right now, your two basic options as an advertiser is to buy Google search ads or to buy Facebook social media ads. Both of these options rely on targeted advertising and plenty of personalization, so if you believe that the new California law will radically limit this type of targeting and personalization, then these two Silicon Valley juggernauts will begin to cede some of their power and control. More importantly, the vast ecosystem of relatively unknown third parties buying and selling your data might slowly fade away. If both Facebook and Google shut off the data spigot to third parties, then these social media players lose the very reason for their existence. It will simply become too risky to buy and sell consumer data.
The CPRA in 2021
The new CPRA law is not perfect, but it is certainly very well intentioned. The goal is to protect California Internet users, as well as to cut back on all the data that is being auctioned off to the highest bidder (literally) on a daily basis. That’s good news for consumers, but it also raises the specter that, in the not-so-distant future, social media may no longer be free. If Facebook can’t make its money by advertising, then it will have to turn to other alternatives, and the most likely one right now is one based on charging Internet users a small monthly subscription to get access to everything the social media platform has to offer. That, of course, will force consumers to finally put a price on their personal privacy.