EU's data reforms are estimated to decrease annual social media expenditure by 400 million euros
Impact of EU Data Protection Rules on Social Media Marketing Spending
The evolving data protection rules in the European Union, such as the General Data Protection Regulation (GDPR) and the Digital Fairness Act (DFA), have been shaping the landscape of social media marketing since 2016. These regulations, currently under debate in the European Parliament, are expected to bring significant changes to the way social media companies operate and generate revenue.
According to Jitender Miglani, a Forrester analyst, the anticipated laws could negatively affect social media spending. In a blog post earlier this week, Miglani announced Forrester's latest study of social media spending in Western Europe, which predicts a reduction in marketing spend on social media by €400 million per year, starting from 2016. This prediction is based on the enactment of tighter data privacy laws on social networking sites.
One of the key rules included in the current debate on data privacy reforms is the 'right to be forgotten' law. This law would force social network operators to delete data about an individual on request, potentially impairing their ability to offer targeted advertising.
The increased compliance costs associated with these regulations are a significant factor. Businesses must invest in GDPR-compliant tools for data collection and implement granular consent options for analytics and personalized ads. Failing to comply risks high fines, up to €20 million or 4% of global turnover for major violations. This compliance requirement drives up operational and marketing costs.
Another impact is the reduced data availability and changes in targeting practices. GDPR and related laws require explicit user consent before collecting personal data, often resulting in many users opting out. This reduces the data available for personalized ads, forcing a shift toward privacy-friendly marketing methods and more reliance on contextual, rather than behavioral, signals.
The proposed Digital Fairness Act also aims to ban manipulative user interface designs used to coerce or deceitfully collect consent or prompt behaviours. This limits the use of common “dark patterns” that helped increase ad engagement and conversion rates, potentially reducing marketing effectiveness or increasing costs to maintain engagement through ethical means.
The regulatory environment also encourages companies to be more cautious in their marketing approaches, potentially increasing spending on legal and compliance teams alongside marketing. Additionally, the EU has increased enforcement activities related to GDPR, resulting in billions of euros in fines and operational interruptions during audits. Collective consumer actions empowered through EU laws could increase litigation risks for digital advertising practices.
Despite these challenges, the growth in social media spending in Western Europe is predicted to be 'double digit', reaching 3.2 billion in 2017. Four factors are driving this growth, according to Miglani: the shift from traditional to online media, social media’s growing share of total marketing spend, the continued growth in social media adoption, and the proliferation of devices for accessing social networks, including smart TVs and laptops.
In summary, the EU's data protection rules have led to increased costs and complexity in social media marketing due to compliance, data restrictions, and bans on manipulative practices. Marketers must adapt to reduced data access and heightened legal risks, driving changes in spending patterns toward privacy-aware and consumer-trust-focused strategies. The new data protection reforms, if enacted, could have a significant impact on social media companies' revenue streams.
- The anticipated EU data protection rules, such as the General Data Protection Regulation (GDPR) and the Digital Fairness Act (DFA), may harm businesses in the finance sector, as social media companies' reduced revenue could impact marketing budgets.
- The evolving EU data protection regulations, like the right to be forgotten law and the ban on manipulative user interface designs, are inducing a shift in technology used for social media marketing, necessitating investment in GDPR-compliant tools and privacy-friendly marketing methods.
