Meta Platforms is facing a significant setback following a ruling by the European Court of Justice (CJEU), which restricts the company from using personal data harvested from Facebook for targeted advertising without strict limitations.
CJEU said Meta Platforms, the parent company of Facebook, Instagram, WhatsApp, etc. must restrict the use of personal data harvested from Facebook for targeted advertising. Meta Platforms has generated revenue of $134 billion in 2023.
This apex court decision, driven by privacy activist Max Schrems, could have far-reaching consequences for Meta’s business model, which relies heavily on personalized ads.
The court’s ruling enforces stricter adherence to the General Data Protection Regulation (GDPR) principle of “data minimization.” This means that Meta can no longer use all the data it collects from users indefinitely for advertising purposes, limiting both the volume and duration of data use.
This significantly reduces Meta’s ability to offer the hyper-targeted advertising services that have been a major revenue driver for the US-based social media platform. Even with user consent, the company can only use a small portion of personal data under the new rules. CJEU did not reveal what will be the small portion.
This decision creates several challenges for Meta:
Revenue Impact: Advertising is Meta’s primary source of income. Restrictions on using vast amounts of user data for ads could reduce its effectiveness, making Facebook’s platform less attractive to advertisers. This could lead to a decline in ad revenue, a key financial pillar for Meta.
Compliance Costs: Meta has already spent over €5 billion to enhance privacy features across its platforms. However, this ruling will likely force the company to invest more in legal and technical compliance with EU data protection laws, including the costly overhaul of its data management and advertising practices.
Broader Industry Implications: The ruling could set a precedent for other companies in the digital advertising space. This creates industry-wide uncertainty and may encourage more legal challenges, forcing Meta and its competitors to adjust their business models globally, not just in Europe.
In summary, the ruling limits Meta’s ability to leverage its extensive data pool, threatening the company’s core advertising model in Europe and potentially beyond, while increasing compliance costs and reducing future growth opportunities in the region.
noyb.eu (European Centre for Digital Rights), the non-profit association, has filed around 800 cases against companies such as Google, Apple, Facebook and Amazon.