Meta's New Ad Format Sparks Concerns Over EU Regulatory Pressures
Meta Platforms is set to begin offering European users of Instagram and Facebook the option of receiving "less personalized ads" without a fee, in a move that may hit the company's revenue in one of its largest markets.
The new ad format, dubbed "contextual ads," will show users what Meta calls ads based on content seen during a browsing session, rather than their broader activity history. While some of these ads - which will also be targeted based on age, gender and location - are expected to cover the whole screen and be unskippable for a few seconds.
The move comes amid pressure from European Union regulators who say users should have access to a free version of Meta's apps with less-personalized ads. The EU has long pushed tech companies to balance their need for targeted advertising revenue with consumers' growing concerns over data privacy.
Meta, however, had resisted giving users a no-fee way to avoid having their in-app digital activity used for advertising purposes, as it risks cannibalizing the company's main source of revenue: highly targeted ads selected using data it gathers about its users. The company has also argued that personalized ads make for a better experience for users and advertisers.
The new ad option is part of Meta's efforts to comply with EU regulators' demands and could impact the company's business in the region. The Financial consequences of this move aren't clear, but partly depend on how many users change their ad preferences. Last year, Meta said introducing less-personalized ads would have a negative impact on its business.
In related news, frustration has been building at Meta over EU efforts to regulate tech companies. The company recently spearheaded an open letter saying the bloc's laws threatened to squelch the artificial-intelligence boom in the region. Meta also delayed releasing its AI chatbots in the EU after regulators suggested the company may need to seek consent to train models based on adults' public posts on Instagram and Facebook.
The new ad format is not without controversy, as some argue that it may still rely on information about a user's activity even if ads are selected to match only the content seen during a given browsing session. Meta, however, maintains that its contextual ads meet EU regulator demands and go beyond what's required by EU law.
EU officials have said their investigation into Meta's compliance with the EU's digital competition law is ongoing, with preliminary findings sent in July. It remains unclear if the new concession will satisfy regulators, but sources close to the matter say discussions are still active.