Meta's Ad Model Faces Limits In Europe: Why Tech Giant Could See Revenue Downside Ahead

Zinger Key Points
  • EU privacy authorities have concluded that Meta should not force users to agree to tailored advertisements.
  • If a sizable part of its users opt out of such targeting, Meta will have less data for advertisers, dampening ad revenues.
Meta's Ad Model Faces Limits In Europe: Why Tech Giant Could See Revenue Downside Ahead

Meta Platforms Inc META is expected to face a massive regulatory charge for its three social networks, Facebook, WhatsApp and Instagram, in the near future.

What Happened: The European Data Protection Board has issued rulings targeting the three sites, and Meta's primary regulator in Ireland will deliver a final judgement within a month, according to Reuters. 

EU privacy authorities have concluded that Meta should not require users to agree to tailored advertisements based on their online activity, a move that might limit the data that Meta can access to sell such ads, Reuters reported, citing persons familiar with the judgment. 

Read also: Meta's Oversight Board Calls For Restructuring Of Content Moderation For Celebrities Like Donald Trump

The specifics and potential value of the monetary penalty will be kept under wraps until the decision is made within a month, but the triplet of fines could total more than 2 billion euros, according to Meta's financial statements, setting a new record for the highest fines received by a single company in one go under the European Union's General Data Protection Regulation (GDPR).

Why It Matters: The board's verdicts do not explicitly require Meta to modify its methods, but rather request that Ireland's Data Protection Commission issue public orders reflecting its conclusions, along with large fines, according to the Wall Street Journal. 

Because Meta's European headquarters is in Ireland, it is the eurozone's primary privacy regulator.

The latest EU judgments, according to Reuters, can be appealed, which might result in their suspension until possibly lengthy litigation.

If they are maintained, they may make it more difficult for Meta and other platforms to serve consumers ads based on what they tap and view within their own apps.

If a sizable part of its users opt out of such targeting, Facebook and Instagram will have less data with which to generate audiences for the tailored ads that analysts and those close to the business say account for the majority of its bookings.

META Price Action: Meta shares were trading down 6.31% at $114.71 midday Tuesday. 

Read next: Some Meta Employees Embroiled In Dispute Over Severance Package Promised By Mark Zuckerberg

Photo via Shutterstock. 

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