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Not so fine after all

10 Feb 2020  |  Dominic Mills 
Not so fine after all

The real test of GDPR will be less about the level or number of fines enacted as the number of breaches reported, writes Dominic Mills as he looks at the latest figures. Plus: an overdue peek at YouTube revenues, and the inspiring launch of new agency Ancient & Modern

Given that the maximum fine for GDPR breaches is 4% of global turnover for any miscreant, and the number of breaches as recorded by individual country equivalents of the UK Information Commissioner’s Office across the EU member states is running at well over 100,000 — 22,000 in the UK alone — you might expect that the penalty fees are rolling in.

Not so. According to a report by law firm DLA Piper, fines so far total just over £100m. Back-of-the-sofa stuff, really. (The figures cover 2019, but in some cases have been rounded up or extrapolated.)

Moreover, that total fines figure doesn’t yet include anything from the UK where the ICO has so far taken a lighter-touch approach, and in addition has two big fines — £280m for breaches by BA and Marriott — pending.

The largest single fine so far has been imposed by France on Google at €50m for transparency and consent principles rather than a specific breach.

Of course it is worth pointing out that no two breaches are equal or necessarily viewed the same way, ICO equivalents can take other actions, including naming and shaming or, as in the UK with real-time bidding, consulting with the industry before taking action.

All that to one side, it’s the sheer volume of breaches that surprises me. If you think the level of breaches in the UK is high, it’s low compared to the Netherlands (40,600) and Germany (37,600), respectively. How do we explain that?

On the one hand, both have less developed digital economies than the UK; one the other, they may have (Germany certainly does) less tolerant cultures when it comes to privacy and data security. Or, maybe, UK participants in the digital economy have got their acts together better and faster. The Italians, in contrast, have just 1,200 reported incidents.

But, it seems to me, the real test of GDPR will not so much be the level or number of fines enacted as the number of breaches reported. It’s true that the two are linked — big, public, fines will fire heavy warning shots across everyone’s bows and incentivise players to tighten up — but the figure to watch is the rate of increase in the number of breaches reported.

DLA Piper says they increased by 12% over the previous period. If that rate stabilises or falls, then the industry is getting it right; if it increases, something is going wrong or it’s not learning the lessons.

A peek at YouTube revenues

Poring over Google’s financials (or Alphabet's, to be correct) is not my idea of fun, so I’m happy to let people better used to reading those sorts of numbers do the work and just cherry pick the bits that are interesting.

Last week, in a first, Alphabet lifted the lid on the individual parts that make up the whole. Yes…it’s becoming more transparent. The exact reason or reasons for this change of heart is unclear; it may be investor pressure; it may be a desire to show that it is not completely dependent on search for revenue; or that it has other revenue streams beside advertising (cloud computing, for example).

Thus, at last, we have a peek at YouTube, and the sense among commentators is that they were surprised at the strength of the $15bn in annual revenues figure for 2019 (eMarketer estimates having pegged revenue at $11bn). The rate of growth is also a surprise, having roughly doubled since 2017, and grown at 38% in the first nine months before slowing to 31% in the last quarter.

With a claimed audience of 2bn+, that gives YouTube an average revenue per user (ARPU) of between $7-8. That is on a par with Facebook’s ARPU and better than Twitter’s approximate $5.50. But because it is an average on a global user base we don’t know what the figures would be in developed markets like the US or UK. Note too that that figure excludes subscription income from YouTube’s 2m paying subscribers.

How do we get an appropriate sense of scale for this? The FT says that the $15bn ads figure is more than US TV networks Fox, ABC and NBC combined earn from ad revenues. Thinking about it in a UK context, ITV’s last full annual figure for ad revenues (for 2018, with the 2019 figure due next month) was £2.09bn which, if you calculated it on a rough ARPU basis (66m UK population) would give an approx £31 per head score.

I know it’s an apples-and-pears comparison, but even adding a premium for YouTube in the UK that is some way behind. Nevertheless, the revenue growth rates are heading in opposite directions and YouTube says it has two areas to grow into: one is opening up YouTube to the kind of performance-style advertising it gets on its other platforms; the second is when (or if) it adds an e-commerce element to YouTube.

Old dogs, new tricks

How inspiring it is to see the launch of a new agency, Ancient & Modern, run by two OAPs (Adrian Holmes aged 66, John O’Driscoll aged 72) and one who will shortly qualify for his Boris pass (Seamus O’Farrell, 55).

After years of heading remorselessly towards youth, the industry is at last finding space for people with experience. I’ve written before about this phenomenon in the media area, but I confess I hadn’t anticipated it in the creative agency space.

Between them, the founders say they bring 130 years of experience to the table. Unencumbered by bureaucracy and ‘network-itis’, which is how many senior people end up filling their days, the three will bring their wisdom and experience to bear on actual client problems without too many distractions. For many clients, that will be refreshing.

There’s some lovely explanatory copy on the agency homepage which doesn’t just celebrate their ages but pokes fun at it.

Beside a picture of an ear is the caption: “We listen very closely to our clients. We have to.”

And a picture of a walking stick is captioned: “Young men in a hurry. The one thing we’re not.”

The one thing Ancient & Modern does not set out to do, and thank goodness for that, is play the ‘old-people-have-all-the-spending-power-and-we-know-how-to-target-them’ card. It may be true, but it’s been dulled by repetition.

So let’s hope that, inspired by Ancient & Modern, more veteran creatives are compelled to check out of their retirement homes and return to business.

And here’s a suggested name: Stannah and Zimmer.

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