Meta Platforms, the parent company behind Facebook and Instagram, is starting to offer a new ad format for European users, responding to growing regulatory pressure from the European Union. The move, which introduces an option for less personalized advertising, comes as the company faces significant challenges in balancing user privacy with its advertising-driven business model.
New Contextual Ad Choice for Users
Soon, Meta will present European users with a choice: continue seeing personalized ads based on their comprehensive activity or opt for a less tailored ad experience relying on immediate session data. Unlike its typical data-driven approach, these ads will only use basic information like age, location, and gender.
The shift aligns with EU regulations, particularly the General Data Protection Regulation (GDPR) and the Digital Markets Act (DMA), which impose strict rules on data collection and use. The GDPR, known for safeguarding data privacy, and the DMA, which targets anti-competitive behavior among tech giants, play crucial roles in shaping Meta’s strategies.
Revenue Concerns and Market Impact
This new format could significantly influence Meta’s business in Europe, which contributes about 23% to the company’s total revenue. Meta acknowledged that reduced ad targeting might hurt advertising efficiency and, by extension, businesses relying on its platforms.
The company warned that such regulatory requirements could impact not just its operations but the broader business ecosystem. “If EU regulation makes digital advertising less efficient, the entire European business community suffers,” Meta stated. This reflects concerns similar to the challenges faced after Apple introduced its App Tracking Transparency feature, which limited cross-app data collection.
Background: Subscription Model and Regulatory Pushback
Earlier this year, Meta launched an ad-free subscription model priced at €9.99 per month on the web and €12.99 on mobile devices, allowing EU users to bypass targeted ads. Known as the “Pay or Okay” model, it required users to either pay for an ad-free experience or agree to data tracking.
This approach met swift criticism from consumer groups, including the European Consumer Organization (BEUC), which argued that such a model pressured users into sacrificing privacy due to high fees. In March 2024, Meta responded by proposing lower subscription rates, cutting fees to €5.99 for individual accounts and €4 for additional accounts.
Over 28 advocacy groups filed complaints to the European Data Protection Board (EDPB), expressing concerns that Meta’s original model set a negative precedent, forcing users to make difficult choices between privacy and affordability.
Antitrust Allegations and Data Training Concerns
Beyond advertising, Meta’s regulatory issues include an ongoing antitrust investigation by the European Commission. In September 2024, the EU Commission accused Meta of anti-competitive practices tied to integrating Facebook Marketplace with its core social networking service. This integration, regulators claim, leverages Meta’s vast user base to stifle competition and marginalize smaller players in the classified ads market.
In July 2024, Meta paused training its AI models using data from European users after privacy regulators raised concerns about explicit consent. This decision affected the company’s AI deployment plans, reflecting its struggle to balance compliance with innovation. The pause came amid broader discussions about how companies collect and use data for training artificial intelligence models, particularly in Europe.
Economic and Business Ramifications
Meta argues that personalized advertising has historically been beneficial for both businesses and consumers. The company’s data highlights that each euro spent on its ad platform returns approximately €3.79 in revenue for advertisers, with an overall contribution of €107 billion to businesses across Europe annually. Such statistics underscore Meta’s stance that reduced ad efficiency could harm small enterprises, which often rely on cost-effective digital marketing to reach target audiences.
The comparison to Apple’s App Tracking Transparency, which has limited data collection and reduced the effectiveness of targeted ads, illustrates the potential challenges that Meta may face as it adjusts to EU regulations. The new ad format reflects an effort to strike a balance between user privacy and economic sustainability.
Ongoing Regulatory Landscape
Meta’s response to EU regulations highlights the tech sector’s broader challenge of adapting to stricter oversight. The company’s compliance measures, including its revised subscription pricing and new ad format, show a willingness to align with evolving rules while trying to maintain profitability.
However, the European Commission’s antitrust allegations and ongoing investigations under the Digital Services Act keep Meta under scrutiny, especially concerning how it handles misinformation and user data.
As the EU’s final decision approaches in March 2025, the outcome could set new standards for how tech companies operate in Europe. The results of these regulatory challenges may also influence other tech giants facing similar pressures in an increasingly monitored global market.
