Privacy regulators in the EU have ruled that Meta, the parent company of Facebook and Instagram, cannot make providing data for targeted advertising a condition of joining the social network. Information about this was published by Wall Street Journal and Reuters.
This decision threatens to destroy the business model of the social network giant and change the financial foundations of the Internet.
Although the decision has not yet been made public, key details were leaked to the press on Tuesday. The decision will not only affect the Meta. Every company that serves targeted advertising works in the same way as the social media giant. It’s sometimes possible to opt out of using data from other parts of the internet for social media advertising, but the new ruling aims to limit companies from using data they collect on their own networks. This will fundamentally change the principle of privacy protection on the Internet.
The EU rulings, if upheld, would “have a dramatic impact on Meta’s revenue in Europe, kneecapping its ability to use information about its users’ on-platform activities in order to sell targeted advertising,” Insider Intelligence analyst Debra Aho Williamson said. “Europe had already been the region with Meta’s largest losses in users and revenue.”
The ruling doesn’t immediately force Meta to change its practices. Instead, it calls on Ireland’s Data Protection Commission to issue specific orders within a month, which are likely to include substantial fines, Reuters reported. Meta will likely appeal the decision as well, which may allow the status quo to continue during litigation.
When people are given a choice about whether they want to be tracked online (while still using a particular site or app), they tend to say no. Last year, Apple introduced a privacy setting that forces apps to ask permission before tracking users. The vast majority of people refuse, and Meta’s business has plummeted as a result — the company said it lost $10 billion due to Apple’s privacy settings alone. The EU’s decision against Meta could mean a financial crisis for the company, whose share price has already fallen this year. Meta shares fell 6.79% after the close on Tuesday following the news.
But the ruling is likely far bigger than Meta. Lots of other companies, from Google to TikTok to smaller players, operate under a similar legal model: consent to targeted advertising or switching to another platform. It is not known how widely the EU decision will be applied across the continent, but it is possible that one of the fundamental models of online business could be disrupted.
It’s an open secret in the tech industry that many companies, apps, and websites haven’t figured out a way to make money other than collecting data and targeting ads. If companies can’t use your data, they can still show you contextual ads based on the content you’re viewing. But contextual advertising is cheaper than advertising tailored using your personal information, and therefore less profitable for the company selling it.
The EU regulation only directly affects businesses operating in the EU, but it’s a sign that governments may finally be changing their stance when it comes to privacy. Lawmakers have previously been willing to pass privacy rules that make certain data practices more burdensome for the business world, but this is the first time a major government agency has taken steps to outright limit targeted advertising.