GDPR Has A Chilling Effect On App Development, Paper States

Global email marketers have reason to be nervous over a study showing that GDPR has chilled the app market since being implemented in 2018.  

In the year following enactment, the rate of app entry fell by half, according to "GDPR And The Lost Generation Of Innovative Apps,” a paper done for the National Bureau of Economic Research. 

“At the start of our sample period in July 2016, our data on the contain 2.1 million apps in the Google Play Store, while AppBrain reported 2.2 million,” the authors write.

They continue: “The number of Play Store apps in our sample then rises to 2.8 million in the fourth quarter of 2017, then falls by almost one million – about 32 percent – by the end of 2018. Available apps in AppBrain saw a similar decline, by 31 percent between the beginning of 2018 and the end of 2018.”

In addition, GDPR-diminished entry cohorts accounted accounted for 45% less app usage than their pre-GDPR levels. Apps that came in after GDPR have seen higher average usage.

The authors note that compliance with GDPR, which is required of all firms processing personal data on EU residents regardless of location, could raise operation costs at both the app and developer level, an impact that could also raise email costs and expose email marketers to penalties. 

The paper, which is not yet peer-reviewed, has its critics. For one, Lukasz Olejnik, an independent privacy researcher and consultant, questions whether the impact could really be “causally linked to GDPR,” The Register reports. 

"The authors apparently ignore, or are unaware of, the fact that prior to GDPR data protection laws existed in Europe, as well," Olejnik told The Register. "For example when I read the following in the paper: 'Under GDPR, developers must obtain user consent to continue processing user data…', I couldn't help but think that this sentence was entirely true also prior to GDPR.

Still, after studying 4.1 million apps available through Google Play from 2016 to 2019, the authors write that GDPR “reduces consumer surplus and app usage by almost a third in a long-run equilibrium with substantially fewer apps because all pre-GDPR entry has been replaced by depressed post-GDPR entry.”

Moreover, they conclude that GDPR, “whatever its beneficial impacts on privacy protection, also produced the unintended consequence of slowing innovation.”

This, in turn reduces the ultimate value to consumers. “Factors reducing entry costs deliver large welfare benefits, while factors hindering entry—such as GDPR—can deliver substantial welfare losses.

Non-compliance with GDPR can cost firms up to 20% of their annual revenue.  

The paper was written by Rebecca Janßen, Reinhold Kesler, Michael E. Kummer, and Joel Waldfogel.

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