Meta's ad-targeting practices violate EU rules

Advertisers in the EU, beware—Meta’s advertising tools may have taken yet another hit.

On Wednesday, regulators in the EU ruled that the way Meta receives user consent for personalized advertising violates EU data privacy rules. Currently, users who agree to Facebook’s or Instagram’s terms of service grant Meta permission to collect personal data for personalized ads, essentially forcing users to accept targeted advertising, a violation of EU rules. The company was hit with $414 million in fines and given three months to deliver a compliance plan.

The ruling stems from the passage of the EU’s General Data Protection Regulation (GDPR), a privacy law that places restrictions on how tech companies collect and use personal data. Irish privacy regulators began investigating Meta the day the law went into effect in 2018. (Though there’s one in the works, the US doesn’t currently have a federal data-privacy law; a handful of states have passed their own laws.)

Meta said it plans to appeal the ruling. “We strongly believe our approach respects GDPR, and we’re therefore disappointed by these decisions and intend to appeal both the substance of the rulings and the fines,” Meta said in a blog post. “The decisions relate only to which legal basis Meta uses when offering certain advertising. Advertisers can continue to use our platforms to reach potential customers, grow their business and create new markets.”

How big of a deal is this? The decision could force Meta to ask for permission from users if it wants to use their data for advertising, a practice that underpins the company’s entire business model. It could put “5%–7% of Meta’s overall advertising revenue at risk,” according to an analyst who spoke to the New York Times. Europe is Meta’s third most profitable advertising market, where it reported $5.7 billion in ad revenue in Q3 2022.

“If they do have to ask for consent, then that’s obviously a big problem for them,” Robert Bateman, head of content at GRC World Forums, a company that runs events on governance, risk, and compliance, told Marketing Brew.

Rewind: In 2021, when Apple severely restricted the ability for advertisers to track iPhone users, it became much harder for marketers to measure ad performance on Facebook and other major platforms.

• Turns out, many people don’t want to be tracked—months after Apple’s changes went into effect, less than 33% of iOS users were opting in to tracking, according to Branch Metrics data cited by the Wall Street Journal.
• In February of last year, Meta claimed that Apple’s iOS update would cost the company roughly $10 billion in revenue in 2022.

The big picture: The EU’s decision could further damage Meta’s ad business in Europe. It was given three months to correct itself, though it could be granted more time through the appeals process.

“Anything which reduces their ability to use data, or the scale of their data, impacts them, and impacts all those advertisers who rely on it,” Wayne Blodwell, the founder and CEO of TPA Digital, a digital advertising consultancy, told us.

While nothing will change overnight and though Meta’s stock is at a five-year low, it’s still the second-largest ad platform in the world. “Facebook still has a ton of eyeballs that advertisers want to get in front of,” Blodwell said.