This Week in Australian Startups - Issue #22, 24th May 2023
Haris Qureshi
VP Sales & Customer Success @ Hatch | Writing @ This Week in Australian Startups
The Australian government is going ahead with an?overhaul of privacy laws, and surprise and surprise Meta is shouting the loudest at some the proposed changes.
This isn’t anything new for Meta or big tech with more stringent privacy regulations in the EU in particular. In fact they were just?fined a record $1.3 billion?over EU user data transfers to the US.
On the surface it seems privacy regulations like this are really there to protect consumers and fight back against big bad tech. For services like Meta/Facebook personalisation are an inherit part of its product, and it’s not really possible to provide their service without personalisation. Meta uses an algorithm to serve posts across Facebook and Meta, and they decide which post is an organic or paid placement, not the advertiser. Advertisers don’t have access to the personal data of users, but can segment broadly through advertising.
Whilst Meta has made?comments?around potentially pulling products from markets like the EU, the reality is it’s extremely unlikely given how much revenue they make -?1/5 of Meta’s total revenue?(~$23.3B) is from the EU.
More often than not we see things repeat themselves, in some ways that’s exactly what’s happening now. In the last 100 years we’ve seen regulation accelerate towards a more open and free market encouraging global economic trade through reducing barriers for businesses to operate.
GDPR was probably the first significant step, but we’re seeing things come full circle, with more countries taking back control and implementing their own stricter rules and regulations - particularly with privacy.
This poses a fundamental shift in the way businesses, in particular tech companies operate. One of the biggest benefits of technology is the concept of zero marginal cost, when in many industries the biggest challenge was distribution, the internet has removed that entire barrier.
You build one platform for everyone, anywhere in the world - it’s most efficient to build for scale. Even with changing regulations, like cookie banners, despite GDPR not applying in every country it was easier for every business to just implement the same rule everywhere rather than have different rules for different countries.
Things are continuing to change and we’re seeing the slow degradation of scalability which will change the way we access technology. Google has already taken the decision to?deny access to Bard in the EU?amid privacy concerns - one product for them, and another for us.
In recent earnings?Apple,?Microsoft?and?Google?all make mention of these changing regulatory environments and how this may create issues down the road. Personally, I’m all for consumer privacy but there does need to be a realistic view on what is and isn’t reasonable.
Countries with strict privacy regulations that create so much friction and barrier to innovation, will become less favourable destination for tech companies. It’s going to be more expensive to comply with narrower, stricter regulations for each individual market for smaller companies. Whilst companies like Meta are making the most noise, they will in the long run benefit most as they have the cash to lobby, and ultimately comply with most regulations. It will create a bigger moat around their businesses with a much higher barrier and cost for competition.
Technology companies focus on iteration and finding true product market fit, scale and then go into the tougher more regulated markets. For countries that don’t make it attractive for startups to simply do business will lose out, and we are more likely to see different versions or restricted access to technology in heavily regulated markets - and for startups perhaps no presence at all until they can justify the cost of entry.
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