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The Future of Data Privacy: Tighter Controls, New Challenges for Startups

As a result of the Cambridge Analytica scandal and the congressional hearings that followed, hearings in which Facebook’s founder provided unsatisfying responses to committee members regarding how the company collects and uses customer data, Facebook and its business model are undergoing new levels of skepticism and scrutiny. Similar internet giants, like Google, are also in the hot seat (by association and by virtue of related revenue models). At the same time, the GDPR is casting its shadow of influence over both established internet businesses and hopeful startups who might otherwise be tempted to take risks and cut corners when it comes to the management of user information.

All this may seem to bode poorly for the biggest giants in the marketplace, who may soon be required to change both their internal practices (how they protect user data from hacks and breaches) and their fundamental business models (how they collect and sell that data in the first place). Facebook, for example, may be required to start selling products or subscriptions to users directly instead offering its service for free and charging third party advertisers. And in the fall—or at least the stumble—of these dominant companies, new startups may see the light of opportunity or the prospect of an easier field of competition.

But for overly optimistic startup founders, experts are delivering a warning, and with good reason: Tighter security and privacy regulations change the marketplace and entrance requirements for everyone, not just the biggest players. And in a new landscape of increased client and investor skepticism, bigger brand names are more likely to generate trust than smaller companies with unknown brands and unproven reputations. It’s a strange paradox, but it may be possible; bigger names and marketplace incumbents hold a certain advantage, even when they get into trouble. So what can a small startup do to gain a foothold in a market that’s just as uneven as ever, but now offers the added challenge of tighter data management requirements?

The answer lies in two separate moves. First, entrepreneurs need a business model that can survive and thrive in this newly competitive landscape. And second, in the year ahead, data security and total compliance will be a must. Startups need an infrastructure of seamless data management that can stand up to intense review if they plan to attract investors (as well as enterprise-level clients). The fastest growing businesses in 2018 and 2019 will offer something others can’t, and will have an aggressive approach to data security that others don’t.