- EU watchdog rules against forced opt-in for tailored ads
- Targeted ads make up most ad revenue, say analysts
- Facebook-parent lost 67% of market value this year
Big tech’s targeted ads model and how data is collected and used has drawn regulatory scrutiny around the world, and Meta Platform’s (META:NASDAQ) saw more than $20 billion wiped off its market value following a potentially damaging EU ruling that could hit Facebook and Instagram revenues hard.
The social media giant saw its stock slump nearly 7% in after-hours trade overnight on Wall Street, reversing a large chunk of the gains the shares have made since early November.
Meta shares are set to open at $113.31 when trading restarts later today, 67% lower than where they began the year.
WHAT’S SPARKED THE STOCK SLUMP?
EU privacy regulators reportedly ruled that Meta should not demand that Facebook and Instagram users must opt-in to personalised ads based on online activity.
Because Meta’s European headquarters is based in Ireland, it falls under the EU regulatory scrutiny, and the European Data Protection Board has issued rulings targeting Meta.
The specifics and potential value of any financial penalties will be kept under wraps until the decision is made within a month. There is speculation that this could results in fines of more than €2 billion euros being handed out to Meta, potentially setting a new record for the highest fines received by a single company in one go under the EU General Data Protection Regulations.
WHY IT MATTERS TO INVESTORS
If the ruling is upheld, it could see millions of users potentially opt-out of this type of targeting, leaving Meta with less user data to use to generate audiences for the tailored ads that analysts and those close to the business say account for the majority of its bookings.
A negative EU judgment could be appealed, according to Reuters, which could result in lengthy and expensive litigation.
Meta may have to change its business model, said Helena Brown, head of data & privacy at London-based law firm Addleshaw Goddard.
‘The direction of travel seems to be that the European regulators will not allow Meta to hide behind provision of services as its basis for using personal data for behavioural advertising,’ she said.
New privacy rules implemented by Apple (AAPL:NASDAQ), which limit digital advertisers from tracking iPhone users, have also been a blow to the Facebook parent.
