The European Court of Justice has just dealt a massive blow to the business models of the global tech giants
Do you enjoy arguing with people on Twitter, making your photos look like they have been dipped in tea on Instagram, and idling away endless hours on Facebook? Isn’t it incredible that you get to do all that for free? Except, you know what they say – if you’re not paying, you’re the product.
Companies that provide free services online make their money by extracting data from their users and then selling it on or using it to help advertisers target specific audiences. Now that business model has just been dealt a huge blow by the European Court of Justice.
Our digital lives – every angry tweet, tea-stained photo and idle post – are stored on servers. And, because most of digital companies are American, most of those servers are in the US. But there’s a snag. European Union rules say that data can’t be transferred to other countries that don’t comply by European privacy rules.
However, there’s also a loophole: under a little-known agreement, US companies can self-certify that they are complying by European data protection rules. Then, as long as they notify customers when the data are collected, they can transfer that data back to the US.
But the ECJ has now said the “safe harbour” agreement, which the European Commission signed in 2000, is invalid because it makes it impossible for the European authorities to do anything if citizens claim that their right to privacy has been breached. The case kicked off after Edward Snowden revealed that the US National Security Agency had gained access to information about foreign citizens stored by US tech firms. An Austrian privacy campaigner asked the Irish Data Protection Commission what information about him Facebook, which has a subsidiary in Ireland, might be passing on to the US authorities. Because of “safe harbour”, they couldn’t tell him and the matter ended up in the ECJ.
The hearing highlighted the difference in how personal data are viewed in Europe – where it is considered a fundamental right – and the US – where security concerns sometimes take precedence.
Last month the US State Department took the somewhat extraordinary step of commenting on an ongoing case by saying the ECJ’s apparent supposition that the US was carrying out “mass indiscriminate surveillance” was “simply not the case”. A cynic might note that the Mandy Rice-Daviesrule probably applies here.
And it’s true that the ECJ’s ruling may make your data that little bit safer from snooping US spooks. But most people are probably of the view that if the NSA wants to waste its time trawling through their boring tweets, photos and posts than it is welcome to knock itself out.
Certainly consumers may end up paying a price for the ECJ ruling. The largest digital companies will be able to afford to set up data centres and, potentially, separate operations in Europe. However, without “safe harbour”, it will take longer for smaller companies and start-ups to spread across the pond. It could also hit companies doing things as mundane as transferring payroll data or information for marketing campaigns. The political ramifications could spread even wider; the already fraught negotiations on the US-EU trade pact will now be fraughter still.
The mundane truth is that the quick and efficient “safe harbour” status will simply have to be replaced by myriad “model contract clauses” between any two entities that wish to share data. That will be a costly administrative nightmare. But the extent to which it will protect people’s privacy remains very much open to question.
And if the free movement of data becomes less free, then so too might the services on which it is predicated.
Jack Dorsey is squaring up for the fight of his life
So, @jack is back. Twitter, the social media site has confirmed that its co-founder Jack Dorsey is returning as chief executive. This is quite the U-turn for the company.
Not only is one of the co-founders making a return after being sidelined in 2008 but Twitter’s board had originally said that it would only consider candidates to replace Dick Costolo who could commit to the job full-time. That looked like it would rule out Dorsey, who also runs Square, a payments start-up he founded in 2009 after being ousted from Twitter.
But now, having seen what he has done as interim chief executive of the micro-blogging site since June, when Costolo quit, the board has changed its mind.
Dorsey is clearly a singular individual. But running two multi-billion dollar companies is quite an ask. Twitter is losing users and money; Square is understood to be weighing up an IPO.
Obvious comparisons have been drawn with Steve Jobs, who founded Apple, was ousted, but then returned while simultaneously running the animation studio Pixar. But Jobs famously had an almost pathological ability to filter out distractions; Dorsey was reputedly ousted from the CEO berth first time round because he would leave the office early for drawing, yoga and sewing classes.
And while there are potential synergies between Twitter and Square, there are also possible conflicts – the micro-blogging site has its own payment system, called Twitter Buy.
In Walter Isaacson’s biography, Jobs describes running Apple and Pixar as “the worst time in my life”.
Dorsey has experienced executives around him at both firms. But ultimately the buck will stop with him. If things go wrong at either company, Dorsey’s multitasking could be used against him.