Facebook and Instagram parent company Meta has been slapped with a preliminary warning from the European Commission over its controversial “pay or consent” model which offers users the choice between personalized ads or a monthly subscription.
In a release this week, the European Commission revealed it has informed Meta of its preliminary findings on the practice, which in its view “forces users to consent to the combination of their personal data and fails to provide them a less personalized but equivalent version of Meta’s social networks.”
In November, Meta introduced the new subscription fee in response to the EU’s Digital Markets Act (DMA), the same law being used to hold Apple’s feet to the fire over its App Store in the territory. Meta’s solution offers EU users on Facebook and Instagram a choice between paying a monthly fee of nearly $14 a month for ad-free browsing, or continued personalized ads if they want to keep using either for free.
According to the Commission, this business model is not compliant for two reasons. Firstly, it “Does not allow users to opt for a service that uses less of their personal data but is otherwise equivalent to the “personalized ads” based service,” and secondly, it “Does not allow users to exercise their right to freely consent to the combination of their personal data.”
To comply, the EU says Meta must offer users an “equivalent service which uses less of their personal data” even if they don’t consent to being tracked for the purposes of advertising. Meta now has 12 months to offer a defense, with proceedings closing in March 2025. If Meta can’t get the EU back on its side, it faces a fine of up to 10% of its total worldwide turnover, rising to 20% in the case of repeated offenses.
It’s another huge hammer blow to Meta’s advertising business, which has already suffered massively in recent years thanks to the App Tracking Transparency feature added to iOS 14 by Apple. That change allowed users to opt out of being tracked across multiple apps and services using a unique identifier, a previously core part of Facebook’s advertising business. Now, the EU seems intent on crushing Facebook’s remaining advertising power. If users are allowed to opt out of the personalized advertising for free, it would mean the advertising that Meta offers businesses on Facebook and Instagram will be much less effective because fewer users will be served ads they’re likely to click on. That will in turn reduce the value of these ads overall, and the amount Meta can charge customers to serve them. All of that’s bad news for the bottom line of a company that has already bet big on the Metaverse and lost in recent years.
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Facebook owner in big trouble over controversial ‘pay or consent’ advertising model — EU takes aim at Meta’s $14 subscription fee
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