Potential European Law Bad For Facebook, Amazon

In an effort to protect younger peoples’ online reputation, Europe is considering a law that would force Internet companies to obtain consent from consumers in order to use their personal data. The law, which could have significant effects on companies like Facebook and Amazon (NASDAQ:AMZN), would also require the company to delete the consumers’ data forever at their request or get fined for failing to comply.

This could prove to be a significant blow for companies like Facebook, which rely heavily on consumer data in order to target their advertisements. For example, if someone were to make their status, “Got a great sweater at Macy’s,” Facebook would instantly target all Macy’s (NYSE:M) ads toward that person, as well as any of their friends that “Liked” the status. This ability to pinpoint customers for an advertiser makes the data that Facebook collects invaluable.

The same can be said about Amazon, which groups consumers based on the products they buy, then directs advertisements that most closely resemble these purchases. However, pinpoint advertising would become much more difficult if the European law passes. Not only would utilizing customer information require consent by all of a company’s users, but years of past customers’ information could be deemed illegal. If the law passes, Amazon and Facebook will take huge hits in their advertising revenue.

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To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com