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At the beginning of the new year, will the European Union's ruling against Facebook hit the online advertising industry hard?

2023-01-06T09:17:56.605Z


In 2022, the stock price of Meta (formerly known as "Facebook") will drop by nearly two-thirds. For the metaverse, which has devoted itself to the development of the metaverse (metaverse) last year, it lost 9 billion U.S. dollars and was pressed by Apple for "rejecting App tracking".


In 2022, the stock price of Meta (formerly known as "Facebook") will drop by nearly two-thirds. For the metaverse, which has devoted itself to the development of the metaverse, it lost 9 billion US dollars last year, and was cut by the "Reject App Tracking" button on Apple's mobile phone by another 10 billion The new year didn't get off to a great start for Mark Zuckerberg, who earns $100,000.


Just on January 4, the Irish Data Protection Commission (Irish Data Protection Commission), where Meta's European headquarters is located, judged that Meta violated the "General Data Protection Regulation" (GDPR), and proposed a fine of 390 million euros to Meta, which is already higher than that of Meta. Half of the total fines in Europe last year.

For Meta, which has $111.8 billion in revenue in 2021 and a 40% profit margin, the fines could be considered an operating expense.

The problem is that this judgment by the Irish authorities may further hit the online advertising business of Meta and even its rivals.

According to GDPR, companies must have a special legal basis for processing users' personal data, including six items: "consent", "contract", "legal obligations", "significant interests", "public power positions", and "legitimate interests".

What happened this time was the "contract" part.

Facebook and Instagram have been supporting their behavioral advertising (behavioral advertising) through the "necessity of contract" with users, and provide targeted advertising messages to users by analyzing individual users' browsing behavior and personal background.

The logic is that this kind of behaviorally targeted advertising is necessary in the services Facebook and Instagram provide to users.

The Irish Data Protection Commission, which has been criticized for being "too close" to technology giants, originally supported Meta's defense, arguing that providing users with "personalized services" includes "personalized or behaviorally targeted advertising", which constitutes "user and a service provider of their choice”—the idea is that users agree to the service provider’s use of their personal data to run an advertising business for profit in exchange for “free” social media services—thus behavioral targeting is fulfillment. A necessary part of the contract between the user and Meta.

Zuckerberg (Mark Zuckerberg).

(Getty Images)

However, as national regulators disagree on this, the European Data Protection Board has the final say.

At the end of last year, the EU Data Protection Commission believed that "personalized advertising" is not an essential part of Facebook and Instagram's social media services to users, so there is no "contractual necessity" for them to collect users' personal data for behavior-targeted advertising legal basis.

After accepting the EU ruling, in addition to the fine, the Irish authorities also required Meta to change its data processing policy to comply with EU norms within 3 months.

Although Meta has stated that it will appeal this, if the EU finally upholds the existing judgment and Meta wants to continue to provide behaviorally targeted advertisements, it is likely to actively seek additional "consent" from users for this, just like the iPhone's approval of various apps. The options for "Allow" or "Ask App not to track" are average.

A survey among users in the United States shows that after "choice", as many as 96% of users choose "do not track".

Apple's privacy policy, of course, cannot prevent Meta from collecting user data in its various apps for behavior-targeted advertising.

However, if the EU's judgment is finally established, Meta will not even be able to use user data obtained from its own app for personalized advertising without the user's specific consent.

iPhone's "Ask Apps Not to Track" option.

(Apple)

According to an analysis cited by The Wall Street Journal, Meta's ad revenue could drop by 10 to 20 percent if a significant number of users opted out of their data being used for targeted advertising.

At present, governments around the world have actions or discussions to prohibit behavior-targeted advertisements to varying degrees. For example, the Digital Services Act (Digital Services Act) passed by the European Union last year prohibits behavior-targeted advertisements for underage users, and also prohibits the use of "sensitive "data" (which may include religious background, etc.) for such personalized advertising.

The EU's judgment can be said to be one of the links of this general trend.

If behaviorally targeted advertising is completely banned, or users can easily and effectively choose whether their data will be used for behaviorally targeted advertising, the impact will not only be limited to Meta's business, but will also involve changes in the entire Internet ecosystem.

Without behavior-targeted advertising for individual users, Internet giants have to turn to so-called "contextual advertising" to make targeted advertising based on various website content and themes, or search keywords provided by users themselves. Ads are no longer based on individual user profiles, browsing history, etc.

This will benefit the development of traditional media other than social media. It will also change the atmosphere of Internet companies' extensive collection of users' private data, and weaken the ability of governments and political parties around the world to use social media to influence public opinion and political intentions in a targeted manner.

However, Internet giants like Alphabet or Meta, the parent company of Google, have long relied on behavioral targeting advertising for profit, and advertising revenue accounts for 80% to 90% of their total revenue. They must fundamentally change their business models.

British media: Meta is considering whether to restore Trump's Facebook and Instagram accounts European Commission warns Meta: Facebook classified ads suspected of monopolizing EU: Meta is involved in violating anti-monopoly regulations or fined $11.8 billion to continue investing in Metaverse

Source: hk1

All news articles on 2023-01-06

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