GDPR killed a third of the Android app market, claims study

A paper by a cohort of economic boffins claims the EU’s GDPR legislation has led to a reduction in the number of apps on Google Play, as well as increased costs and reduced revenues for developers.

The EU’s General Data Protection Regulation legislation – a key driver of why websites are so annoying to use nowadays thanks to mandated pop ups – has had quite an effect on the Google Play app store since it was enacted in 2018, according to a paper titled GDPR And the Lost Generation of Innovative Apps.

The working paper, which hasn’t been peer reviewed, was written by a group of academics; Rebecca Janßen from ZEW Mannheim, Michael E. Kummer from the University of East Anglia, Reinhold Kesler from the University of Zurich, and Joel Waldfogel from the University of Minnesota.

The paper used data on 4.1 million apps on the Google Play store from 2016 to 2019, and the general claim is that that GDPR ‘induced the exit of about a third of available apps; and in the quarters following implementation, entry of new apps fell by half.’

The findings have been split into five parts:

First, GDPR sharply curtailed the number of available apps, via two mechanisms. When it took effect, GDPR precipitated the exit of over a third of available apps; and following its enactment, the rate of new entry fell by 47.2 percent, in effect creating a lost generation of apps.

Second, consistent with the unpredictability of app success, the falloff in app entry prevented the launch of both ultimately-successful and ultimately-unsuccessful apps. The numbers of apps reaching ten thousand or one hundred thousand cumulative installations within, say, four quarters of birth fell nearly as much as the decline in overall entry.

Third, apps became less intrusive after GDPR, although the decline in intrusiveness was partly the continuation of a pre-existing trend.

Fourth, average usage per app rose for the vintages launched after the imposition of GDPR, consistent with GDPR raising app development costs.

Fifth, using the structural entry model, we estimate that the depressed post-GDPR entry rate would give rise to a longrun 32 percent reduction in consumer surplus and a 30.6 percent reduction in aggregate usage and therefore revenue.

The paper mentions that of course these effects were not the intention of GDPR, and that it is not saying whether in general it was a good idea or not – just that it has identified these impacts.

By way of summering its findings the paper states: “Whatever the benefits of GDPR’s privacy protection, it appears to have been accompanied by substantial costs to consumers, from a diminished choice set, and to producers from depressed revenue and increased costs.”

The counter argument is that if GDPR was doing its job, there were bound to be casualties for those apps that were not compliant to its data protection requitements – and ultimately perhaps the consumer is better off with less apps that are abiding by the regulations than more apps that are not.

It could be argued higher development costs and less apps is a price worth paying – however the underlying point of the paper is that there were some unintended consequences of the legislation impacting the size and buoyancy of the app market. And this is a point worth noting too at a time when governments around the world are getting their legislative knives out for big tech on multiple fronts.

For example – in the UK the Department for Digital, Culture, Media and Sport is currently pondering  new rules that would mean app stores would have to commit to a new code of practice, which  establishes a set of security and privacy requirements for apps on their platforms.

To take the government at its word, tackling malware is a good intention – however as this paper points out there can be unintended consequences of such wide reaching governmental intervention. You just have to hope those tasked with forcing stuff like this through have a proper go at trying to predict some of that as best they can before throwing too much legislation in the road.

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