BIG DATA

Tech companies are distancing themselves from big data

Obsession
Glass
Obsession
Glass

Big data, once a Silicon Valley darling, is becoming a tech pariah. Companies like Google and Facebook built their ad businesses using what they know about their audiences but amidst renewed interest among regulators and consumers on data privacy, no one wants to flaunt it anymore.

In earnings reports earlier this month, Google and Twitter downplayed the data their businesses use as well as their vulnerability to tougher privacy laws like the European Union’s General Data Protection Regulation, which goes into effect on May 25. Facebook’s Cambridge Analytica scandal focused attention on how the tech companies collect and user customer information, raising the possibility of further data-privacy regulation elsewhere, too.

Google has access to an unfathomable amount of user information through its many platforms and services, like Search, YouTube, Gmail, Cloud, Chrome, and its smart speaker Google Home. It leverages some of what it knows about its audience to sell ads. In the first quarter of 2018, Google generated $26.6 billion (pdf), or 85% of its revenue, from advertising. eMarketer estimates Google will capture 31% of the world’s digital advertising revenue this year.

Yet, Google during its earnings call argued that its core ad business didn’t rely all that much on its vast array of user data, and therefore it bore little risk from any new regulation. “It’s important to understand that most of our ad business is Search,” said Sundar Pichai, Google’s CEO, “where we rely on very limited information, essentially what is in the keywords to show a relevant ad or product.”

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Twitter, which also makes most of its money from advertising, said it’s nothing like those other guys (ahem, Facebook) who are causing all this data-privacy trouble, either, on its earnings call this week. The company only recently became profitable. “We are different from our peers in that Twitter is public,” said CEO Jack Dorsey, in what seems like a disingenuous observation, given you can send direct messages on Twitter. “We serve the public conversations, so all of our data is out in the public, out in the open. And our data business just organizes that public data in real-time to make it easier for brands, researchers and organizations to utilize it.”

See? Different.

Meanwhile, Netflix, which unlike Google and Twitter does not sell ads but relies on viewer history to keep people on its platform longer, told investors it wasn’t really operating like a technology company these days anyway.

“Objectively, we’re much more of a media company in that way than pure tech,” said CEO Reed Hastings, comparing the more than $10 billion it plans to spend on content and marketing this year to the $1.3 billion it has budgeted for tech. He said Netflix is glad not to be in the advertising business and is “substantially inoculated from the other issues that are happening in the industry,” because of it.

Apple, which posts earnings next week and makes earns most of its revenue selling hardware, made a similar argument. When CEO Tim Cook was asked by MSNBC (paywall) last month what he would do in Facebook CEO Mark Zuckerberg’s position, he said:

“What would I do? I wouldn’t be in that situation.”

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