Meta’s economic model weakened in Europe

Meta’s economic model weakened in Europe

The heavy sanction imposed on Wednesday by the Irish privacy policeman on Meta weakens the economic model of the American giant, sanctioned for its practices in the collection of personal data and targeted advertising.

The parent company of Facebook and Instagram has been fined two fines totaling 390 million euros for violating European legislation on this data.

Above all, it is now deprived of the legal basis which authorized it to compile, store and analyze the data of the hundreds of millions of Europeans using its services, without formally asking them for their agreement.

This decision “could be a severe blow for Meta,” said Dan Ives, an analyst at the American investment company Wedbush Securities, who estimates that the group could eventually lose 5% to 7% of its turnover.

Wall Street “hopes” however that the call announced by Meta “will continue to push the maturities to a later date and is not worried in the short term”, he adds.

Europe represents a key market for Meta.

Facebook had 303 million daily active users in Europe in the third quarter of 2022, compared to 197 million in the United States/Canada zone, out of a total of 2 billion worldwide.

Europeans also accounted for around 21% of Meta’s advertising revenue at the same time (47% for the United States/Canada zone), according to its financial accounts.

According to lawyers, the decision of the Irish regulator theoretically obliges the American giant to ask its European users for specific consent in order to offer them targeted advertising. Otherwise, he will only be able to send them less personalized ads, which will earn him much less.

“We now see no other possible basis than the formal consent” of Internet users, explains Paul-Olivier Gibert, president of the French Association of executives specializing in personal data.

Lawyer Sonia Cissé, of the firm Linklater, believes for her part that the Irish decision “does not call into question the economic models” based on targeted advertising, such as that of Meta.

“But it definitely frames them and limits them,” she says. To encourage users to give their consent, “companies will have to redouble their ingenuity to make themselves attractive” to consumers, she believes.

– Irish benevolence –

In its disappointment, Meta can at least count on the assumed benevolence of the Irish data protection authority. This does not hide the fact that it only sanctioned the group under duress and coercion by its European counterparts, gathered in the European Data Protection Committee.

She even refused to undertake an investigation into all the data collected by Facebook and Meta, as these counterparts demanded – an injunction which she is contesting before the European Court of Justice.

Some also wonder if the regulators of the European Union are not doing a little too much in the face of the American giants. “At the moment, there are a lot of sanctions against American companies,” said a lawyer specializing in litigation related to personal data, who wished to remain anonymous.

“The European regulatory authorities are very vigilant about protecting the interests of users” of the platforms, but “sometimes I wonder if this is not also a way of favoring European companies”, she continues.

However, “users are also very happy to find free services that, for the moment, European companies have not been able to provide them”, she argues.

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