Under mounting legal pressure from the European Union regarding its binary approach of “pay us or agree to ad tracking,” Meta is once again revising its advertising strategy for users of Facebook and Instagram in the EU. This is understandable given that non-compliance could result in fines reaching up to 10% of Meta’s global annual revenue.
The latest move by the adtech leader aims to bypass EU regulations by proposing what it describes as “less personalized ads.” The regulatory landscape became more stringent earlier this year with the introduction of the Digital Markets Act (DMA), a key piece of legislation focused on market contestability within the bloc.
In a blog article outlining upcoming changes to ad targeting for EU users, which was initially reported by the Wall Street Journal, Meta announced that users who choose not to subscribe to the ad-free option introduced over a year ago will soon receive ads utilizing less personal data for “context” targeting compared to current practices. Presently, Meta employs extensive cross-service and cross-site tracking as well as profiling, commonly referred to as surveillance.
In essence, Meta is being compelled to adopt a less intrusive approach to advertising in the EU. However, it may still need to take additional actions as regulators finalize their investigation into the DMA.
The concept of “less personalized ads”
Meta plans to base its “less personalized” ad targeting on data points such as an individual’s age, location, gender, and their interactions with ads.
Whether this will suffice to meet the requirements of EU regulators remains uncertain, as the bloc is expected to complete its DMA investigation next year. Importantly, Meta is also confronting ongoing privacy concerns regarding its ad tracking methods under the General Data Protection Regulation (GDPR), along with consumer protection grievances.
The primary legal challenge for Meta under the DMA is that, as a designated gatekeeper, it must secure user consent for combining personal data across its core platform services (CPS) and other services. This obligation aligns with the GDPR’s consent requirements.
Both Facebook and Instagram qualify as CPS, which means that since March, when DMA compliance began, Meta has needed explicit permission to track and profile users in order to deliver targeted ads in the EU.
However, Meta has not sought consent for its extensive tracking and profiling practices; instead, it has offered users a straightforward choice: accept surveillance or pay for an ad-free experience.
The EU initiated a DMA investigation into this dichotomous option in March. In July, the Commission released preliminary findings suggesting that Meta’s “pay or consent” model may not align with regulatory standards.
The Commission’s examination of Meta is still ongoing. In the meantime, the company is attempting to reshape its advertising model in a manner it claims complies with regulatory demands.
In its blog post, Meta asserted that “the changes we’re announcing today fulfill EU regulatory requirements and go beyond what is mandated by EU law,” although no substantiation for this statement was provided.
Despite this, Meta asserted its belief that personalized ads provide the optimal experience for users and businesses alike, reflecting somewhat contradictory messaging as the company navigates a business situation it would prefer to avoid.
Reduction in ad-free subscription pricing
In addition to minimizing the amount of personal data used for ad targeting, Meta has also announced an immediate 40% reduction in ad-free subscription costs.
This change will decrease the monthly subscription price for ad-free versions of Facebook and Instagram from €9.99 to €5.99 on the web and from €12.99 to €7.99 on mobile (iOS and Android). (Note: Meta attributes the higher mobile costs to fees imposed by Google and Apple via their app stores.)
For users with multiple Facebook or Instagram accounts, there will be an additional charge of €4/month on the web and €5/month on mobile for each extra account.
Thus, Meta may be looking to regain some revenue lost from running less-targeted ads by increasing subscriptions to ad-free versions. Its blog post suggests that the user experience for free versions of Facebook and Instagram will be diminished with unskippable ads occasionally overtaking the entire screen, potentially prompting frustrated users to opt for a fully ad-free experience.
Meta claims that the reduced pricing for ad-free subscriptions (previously mentioned by the company) will position these options as “among the most affordable across our peers.” However, the basis for this comparison is unclear, especially as competing platforms like TikTok remain free to use.
When asked for comments regarding Meta’s recent announcements, the EU refrained from providing any judgments while its DMA investigation continues.
Commission spokeswoman Lea Zuber informed TechCrunch that “the new model introduced by Meta is solely the company’s responsibility and is neither endorsed nor agreed upon by the Commission.”
It is premature to speculate on the implications for ongoing non-compliance proceedings, she added, stating, “Our objective is to ensure full and effective compliance from Meta in this matter as quickly as feasible.”
This report was updated with a correction regarding the price reduction.
Compiled by Techarena.au.
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