Bloomberg
Facebook is poised to bank more cash and influence from the European data privacy law designed to curtail its power.
The EU’s General Data Protection Regulations that went into effect last week may benefit Alphabet Inc. and ad-rival Facebook Inc. by squeezing out smaller competitors and driving more ad dollars into the Silicon Valley companies’ coffers, according to MKM Partners analyst Rob Sanderson. The problem for small companies — and the boon for the advertising titans — is that compliance with the GDPR is a difficult needle to thread, which has put the squeeze on smaller companies in the sector.
“It could be an unintended consequence that privacy regulation squeezes marginal players and drives even more share consolidation into the duopoly,” Sanderson wrote in a note to clients early Friday. “This would be a major backfire on EU regulators who are trying desperately to minimize the influence of Google and Facebook in the region.”
The two ad giants dominate between 70% to 85% of online advertising depending on the country, and the disappearance of non-compliant firms could boost those numbers.
Facebook does rely on third party data that will be more difficult to obtain, writes Sanderson, but rivals are more dependent than the Menlo Park, Calif.-based company. This among other positive trends following the Cambridge Analytical data scandal caused Sanderson to raise his price target to $255 from $240.
Facebook shares too have steadily gained over the week’s trading, closing at $191.78 Thursday and adding just over 4% for the week taking into account Friday’s midday trading.
Alphabet class A shares have already benefited from this thesis and have climbed nearly 5% this week, with about 3% of the gains coming in Friday trading. The stock closed at $1,100 after Thursday’s regular session.
The benchmark S&P 500 index has gained 0.2% over the week.