Future Retirement Success
  • Politics
  • Business
  • Investing
  • Stocks
  • Politics
  • Business
  • Investing
  • Stocks

Future Retirement Success

Investing

Major EU Regulator Threatens Free Social Media by Cracking Down on Personalized Advertising

by April 23, 2024
April 23, 2024
Major EU Regulator Threatens Free Social Media by Cracking Down on Personalized Advertising

David Inserra

In a ruling issued on April 17, the European Data Protection Board (EDPB) issued a decision that could unravel the very viability of social media company business models. The technical, inside‐​baseball nature of the case involving advertising and data privacy means it has flown under the radar but nonetheless presents a dangerous precedent that uniquely targets American tech companies. 

So first, what is going on in this case? In the EU, the sprawling General Data Protection Regulation (GDPR) places many demands on companies in how they manage the data of users, including requiring users to consent to the use of their data. As a result, Meta decided it would offer users two ways to use its platforms:

Users have the free, standard method, in which their user data is collected to create personalized and tailored ads.

In exchange for a small monthly fee, in essence a subscription, users can refuse to have their data collected to personalize ads.

The new EDPB decision, however, considered and rejected this fee‐​based alternative model, demanding that “large platforms” offer an option in which platforms provide their services for free but do not use customer data to target ads.

This goes to the heart of how social media and many other online services are funded. Users and policymakers often forget that the reason many online platforms are free is because they run ads. When in a now‐​famous 2018 congressional hearing, Senator Orrin Hatch confusedly asked Mark Zuckerberg how Facebook could “sustain a business model in which users don’t pay for your service?” Zuckerberg simply replied, “Senator, we run ads.” This awkward interaction sparked a host of articles and memes mocking Congress’s failure to understand the way these companies operate.

via GIPHY

This decision by the EDPB deserves the same treatment because it either completely fails to understand how online businesses work or does understand but simply does not care about the harm it will inflict on US businesses. By targeting its decision only at “large platforms,” the EDPB shows that it has no problem allowing the use of personal data for targeted advertising when done by smaller companies, conveniently protecting European companies.

Let’s be clear about what this decision does. The decision states: 

The offering of (only) a paid alternative to the service which includes processing for behavioural advertising purposes should not be the default way forward for controllers. When developing the alternative to the version of the service with behavioural advertising, large online platforms should consider providing data subjects with an ‘equivalent alternative’ that does not entail the payment of a fee. If controllers choose to charge a fee for access to the ‘equivalent alternative’, controllers should consider also offering a further alternative, free of charge, without behavioural advertising, e.g. with a form of advertising involving the processing of less (or no) personal data.

The EDPB is demanding that beyond the normal ads‐​driven model or the subscription model, Meta and other large platforms must provide a service at no charge but also not have personalized ads. The problem is that the whole reason advertisers pay high premiums for ads is so they can focus their ads on the types of users that will buy their products, support their candidate, or otherwise engage with them.

If a company is selling a first‐​person shooter video game, its target demographic is generally young men who, through their social media behaviors, have shown that they like playing video games. Similarly, if a company is selling professional women’s attire, its audience is working‐​aged women who have expressed interest in buying professional clothing online.

But if the company selling the video game did not have access to the data on who likes video games, that means it must advertise as much to women looking to buy a pantsuit as it does video gamers. Conversely, the women’s clothing company will be advertising its dresses and skirts to work from home video gamers. 

If that sounds like a bad way to advertise, both for the advertiser and the consumer, you would be right. But that’s exactly what the new EDPB decision would require.

This means that advertisers will not find ads to be worth as much. Large platforms will need to drastically lower the costs of ads to keep selling them. But if they change nothing else, that means platforms will make a lot less money and may even lose money. And even if a platform thought it could take the hit of losing money in Europe, then every other country in the world could demand that its users get the same treatment. That isn’t sustainable. 

So realistically, what are the options here? Well, if large platforms can’t make as much money per advertisement, then they might need to increase the number of ads users see. This would be frustrating for EU users as they would have to wade through countless, untargeted ads in their social media feeds. Not a great option and one that regulators might arbitrarily complain is not “fair” to EU users.

Or platforms will simply cease operating in the EU. Together with ever‐​increasing regulations under the new Digital Markets Act and Digital Services Act, this decision must raise the question of whether or not the EU market is worth it. While EU regulators may think their market is too important and too valuable to leave, this decision may be the straw that breaks the camel’s back.

Social media users across the EU may soon find out the hard way that requiring large tech companies to provide their services for free will not work the way the EDPB hopes it will.

0
FacebookTwitterGoogle +Pinterest
previous post
NPR Should Not Be Subsidized by Taxpayers
next post
Buy the Dip or Sell the Rip?

You may also like

Answering Frequently Asked Questions about the Inflation Reduction...

March 18, 2025

Biden Hikes Corporate Tax Expenditures 92%

April 1, 2024

TAKE IT DOWN Act Shows That Noble Intentions...

April 16, 2025

The Occupational Licensing Elves on the Shelf

December 13, 2024

More than Just a Tax Cut: the Case...

October 30, 2024

Texas Crime Data Help Discredit Haitian Migrant Pet...

September 24, 2024

How Trump’s Tariffs Are Destroying One US Business...

April 29, 2025

Analysis of 2022 Audited Financial Reports Shows Wide...

April 11, 2024

A Journalist Arrested for Corroborating a Tip? The...

June 6, 2024

State Taxes and Debt

October 17, 2023

    Get free access to all of the retirement secrets and income strategies from our experts! or Join The Exclusive Subscription Today And Get the Premium Articles Acess for Free

    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • HMRC inheritance tax investigations surge 37% as treasury seeks to plug revenue gap

      June 9, 2025
    • Believ secures £300m to roll out 30,000 public EV charge points across the UK

      June 9, 2025
    • US and China hold London talks to ease trade war tensions

      June 9, 2025
    • British fathers urged to join landmark ‘dad strike’ over poor paternity leave

      June 9, 2025
    • IVF parents should have right to paid fertility leave, says GMB union

      June 9, 2025
    • Reform UK clashes with Bank of England over interest payments to lenders

      June 9, 2025

    Categories

    • Business (8,158)
    • Investing (2,019)
    • Politics (15,571)
    • Stocks (3,136)
    • About us
    • Privacy Policy
    • Terms & Conditions

    Disclaimer: futureretirementsuccess.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2025 futureretirementsuccess.com | All Rights Reserved