About the only issue where controversial President Donald Trump can hope to gain bipartisan support is the regulatory environment. In common economic theory, fewer regulations bolster growth and activity because companies are not encumbered by bureaucratic procedures. The fact that the broader markets jumped to all-time records is evidence of Trump’s pro-business credentials.
But with his latest decision to repeal internet privacy protections, even the president’s sole bipartisan bargaining chip is at risk.
On Monday, Donald Trump signed a congressional resolution that officially overturns consumer protection proposals forwarded by the Federal Communications Commission. These measures, if they were to pass, would have required internet providers to ask permission before they could datamine their members’ online activities.
Naturally, the Trump administration has a different take towards the online privacy repeal. These well-meaning protections would put internet providers like Verizon Communications Inc. (NYSE:VZ) and Comcast Corporation (NASDAQ:CMCSA) at a disadvantage. That’s because internet companies, such as Facebook Inc (NASDAQ:FB), are not affected either way by the FTC proposals. They could datamine their subjects to high heaven and not have to say a word.
According to White House press secretary Sean Spicer, “The president pledged to reverse this type of federal overreach in which bureaucrats in Washington take the interest of one group of companies over the interest of others.” In other words, President Trump wants to avoid picking winners and losers.
Ironically, that’s exactly what he’s doing with the internet privacy repeal. Broadband companies are no doubt overjoyed. However, other sectors that were previously unaffected by the debate will now find themselves behind the eight-ball. Unfortunately, there’s no such thing as a consequence-free decision, especially one that is as far-reaching as the online privacy repeal.
Here are two winners, and two losers, amid the latest Trump controversy.
Online Privacy Winner: Amazon.com (AMZN)
I’m sure the management team of Amazon.com, Inc. (NASDAQ:AMZN) was paying close attention to the online privacy debate. As the king of e-commerce, and no stranger to datamining practices, fewer regulations would positively impact their business model. And now that President Trump has made it official, AMZN is the best stock to buy, ever.
In the fourth quarter of 2016, online transactions represented 8.3% of total retail sales. Better yet for AMZN, the trend is only moving higher. We already know that the e-commerce giant is stealing market share from the brick-and-mortars. But with the Trump administration taking its hands away from the regulatory vice, Amazon has a license to datamine.
Of course, they were going to do this with or without the internet privacy repeal. However, with the repeal, AMZN can fine-tune their marketing endeavors. This is due to the fact that internet providers can sell information regarding their members’ internet usage behaviors. This opens up the floodgates of opportunity for Amazon, which can then hit hard with extremely relevant advertisements.
The consequences of the online privacy repeal are definitely creepy. Nonetheless, you can’t deny that AMZN is now on most investors’ “stocks to buy” list.
Online Privacy Winner: Alphabet (GOOG, GOOGL)
One of the reasons why the online privacy repeal was such a big issue for internet providers was fairness. Providers would have had to abide by consumer protection laws, while companies like Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) had free reign. That seemed remarkably imbalanced, and from that angle, you can appreciate President Trump’s position, even if you don’t agree.
But with the repeal decision, why would this put GOOG on the stocks to buy list? For one thing, GOOG owns the internet. There is not a single thing you can do on the internet that Google doesn’t know about. That magnitude of dominance will not disappear with a lone act such as the internet privacy repeal.
In fact, it’s only going to get bigger. Now that internet providers can sell their members’ data to the highest bidder, it’s game on for GOOG. Companies will look for the most effective marketing platform to sell their products and services. And really, what better place than Google? Their advertising infrastructure is second to none. That will drive up business, and more importantly, crush what little competition is left.
It’s not pretty, it’s not fair, but it works, and that’s why GOOG belongs on your stocks to buy list.
Internet Privacy Loser: Cyren (CYRN)
No matter where you stand on the internet privacy debate, one thing is clear: President Trump’s decision opens up the discussion of internet ownership. Does an internet user have a right to privacy, or is that right forfeited when he or she logs on? For example, I could take my video camera to an NFL game and record the action. However, the end product belongs to the NFL, and therefore, I have very limited rights to what I recorded.
Such questions will dog companies like Cyren Ltd (NASDAQ:CYRN), which specializes in multiple network security solutions, including email security. However, the online privacy repeal upends even private discussions via email. While the actual content (presumably) remains hidden, internet providers can tell with whom their members communicate. Based on that information, a profile can be created, which can then be sold to online advertisers.
Even worse, how could CYRN stop that intrusion?
Again, it goes back to the ownership question. If you own your property, obviously you have full rights to it. But if the property is owned by another entity, the idea of rights fades quickly. The problem with companies like CYRN is that they can stop malicious intrusions into your computer or network, and sure, that’s still important. But what if the attack was coming from within?
That’s a higher-level question that CYRN nor any entity can answer. Unfortunately, through no fault of their own, it puts Cyren at a disadvantage. It stinks, but it is what it is.
Internet Privacy Loser: Imperva (IMPV)
Opponents of the online privacy repeal have argued that President Trump has no solution for consumer protection concerns. It’s great that businesses can flourish under a less burdensome environment, but the same courtesy should be extended to consumers. Otherwise, it’s awfully naive to assume that big business will police itself and simultaneously look after the little guy.
First off, the idea of cybersecurity is becoming a joke, at least from the consumer end. Moving forward, internet users will have to trust corporate America to treat their behavioral data ethically. To that, I say good luck.
Worst of all, IMPV and similar companies can do nothing about this.
Sure, Imperva can protect my network from outside, malicious threats. But privacy is as much of a concern as protection. The latest and greatest firewall can’t do anything if my internet provider decides to sell me out. And who knows how this data can be utilized? We’re assuming it’s for advertisement, but other nefarious agendas could be actualized.
The internet privacy repeal is beginning to look like the proverbial road paved with good intentions. That unfortunately doesn’t lead to a good place for companies like IMPV, which will see their effectiveness diminished.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.