Meta’s advertising business in Europe is growing more slowly than in its other major markets, a shift that follows the rollout of a less-personalized advertising option for Facebook and Instagram users in the European Union.
In its latest earnings briefing, Meta said advertising revenue in Europe rose 18% year over year in the three months through September. That was below the company’s 33% advertising-revenue growth in the United States and Canada, and continued a deceleration in the European market.
A different advertising choice
At the start of the year, Meta began offering EU users a Less Personalized Ads model, or LPA. The option emerged after European regulators found that Meta’s earlier approach did not meet obligations under the Digital Markets Act to provide an equivalent service that uses less personal data.
The European Commission had objected to Meta’s previous model, under which users who did not want their data used for personalized advertising could pay for an ad-free service. The company was fined €200 million in connection with the ruling.
Under the LPA model, ads are based chiefly on what a person views during a current session, while still using limited information such as age, location, and gender. Meta says the system uses 90% less data than its personalized advertising model.
Revenue growth has diverged
Meta did not directly attribute the latest European figures to the new option. But the company had previously warned investors that the fully rolled-out less-personalized offering could become an additional headwind in the region.
The timing has drawn attention because European advertising growth has slowed since the option was introduced. The two preceding quarters saw regional growth move from roughly 40% to 24%, while the US and Canada accelerated from 31% to 33%, according to figures cited in the report.
Dominic Ball, an equity research director at Rothschild & Co Redburn, told WIRED that the EU’s free personalized-advertising option is contributing to the regional slowdown. Meta does not disclose how many users have selected each available option, making it difficult to measure the direct effect of consumer choice on the company’s revenue.
Why personalization matters
Personalized advertising aims to make an ad more relevant to a recipient by using information about behavior and interests. Meta has warned that using less data can reduce the efficiency of advertising, resulting in fewer transactions and more ads being closed because they are repetitive or irrelevant.
That matters not only for Meta’s revenue but for advertisers deciding what they are willing to pay. If targeting is less precise, the economic value of an individual advertisement can fall. The latest results suggest that this question is becoming more material in Europe than in Meta’s North American business.
A test for the EU’s digital rules
The development offers an early business signal from one of the EU’s most consequential digital-market interventions. The Digital Markets Act is intended to curb the power of major online gatekeepers and expand user choice. In this case, the policy has pushed Meta to offer a lower-data advertising experience without requiring users to buy an ad-free subscription.
The available figures do not establish a simple one-to-one cause between the new model and Meta’s slower European sales growth. Advertising demand, economic conditions, competition, and changes in pricing can also affect revenue. Still, the differing growth rates across regions, together with Meta’s earlier warning, put the less-personalized option at the center of the company’s European outlook.
For regulators, advertisers, and platforms, the coming quarters will show whether lower-data advertising settles into a durable market model—and how much its costs are shared among technology companies, advertisers, and the consumers receiving the ads.
This article is based on reporting by Wired. Read the original article.
Originally published on wired.com
