Meta, the parent company of Facebook, has suffered a significant setback as the European Union's highest court undermined the legal foundation of its targeted advertising approach.
The ruling is poised to result in a German prohibition on Meta's merging user data from WhatsApp, Instagram, and external websites with Facebook data to deliver personalised ads.
The case originated from a determination by a German antitrust authority that Facebook was exploiting its dominant position by combining data without obtaining users' voluntary consent. This decision triggered a legal battle, culminating in the recent ruling from the Court of Justice of the EU (CJEU). The CJEU's judgment reinforces the connection between antitrust and privacy enforcement, indicating potential ramifications for regulating data practices among tech giants.
The court's challenge to Meta's reliance on asserting a 'legitimate interest' as grounds for processing users' data for personalised advertising without explicit consent is of particular significance.
Ash Dharan, senior director of performance at NP Digital, tells Campaign that it seems unrealistic to never share any data in today's digital world, particularly if you wish to purchase online.
She points out that sharing customer data for marketing purposes is not new. Before digital platforms, customer databases were used for direct mail catalogues and phone sales.
Moreover, data makes the world – specifically, the Internet go around. Moving to zero data-sharing would have real-world consequences for all of us, cautions Dharan.
“For starters, stripping businesses from the ability to collect and use data would mean ads disappear from the internet. Not a bad thing. But, many of the internet services we use for free are free because ads are paying for them,” explains Dharan.
“Secondly, the ability to collect data and target advertising has levelled the playing field for small businesses that lack the enormous budgets of more prominent companies. Before targeted advertising, placements were limited, meaning the deepest pockets and highest bids won.”
Dharan advises small business advertisers to speak up soon and loudly before their ability to advertise online is curtailed.
“Targeted online advertising – which relies on data-sharing – allows small businesses to compete with the big guys. Right now, zero data-sharing proponents dominate the discourse,” Dharan adds.
In Asia-Pacific, nothing much will change for Meta, predicts Michael Sweeney, head of marketing at Clearcode, because this ruling comes from the EU and only applies to EU citizens and residents.
However, Sweeney is not ruling out other countries globally adopting similar data protection laws soon.
“It’s been widely known that Meta’s decision to adopt the legitimate interest basis for lawfully processing user data did not comply with the GDPR,” Sweeney tells Campaign.
“Meta continued its unlawful data-processing activities, knowing full well that it would take years for the EU to get this ruling through the courts while raking in billions of dollars in advertising revenue. When introducing new data protection laws, most governments move at a snail’s pace.”
Matt Sutton, chief revenue officer, TrafficGuard, points out that social media has been the biggest communication revolution since the Internet.
As a civilisation, he says we are only just starting to realise the monumental scale of its impact on our societies and our daily lives, encompassing everything from how our politicians’ court influence to the safety of our children.
“We see the pendulum swing from the ‘free for all’ on data mobility of the early ‘Noughties’ to a strong political desire to regulate,” Sutton tells Campaign.
“From a consumer perspective, it will be fascinating as people also want a free Internet that is easy to use and expect frictionless personalisation - so something will need to give.”
Sutton observes that for big tech like Meta, it may well be the case that though they are global, how they handle data privacy differs by geo depending on the level of regulation and consumer scrutiny.
“For the advertising industry and marketers at large, wherever you look, this brings headwinds. If data was the ‘new gold’, first-party data is platinum,” adds Sutton.
Threats to Threads
Aside from fighting the EU, Meta appears to be taking on Twitter with its new Threads text-based app. The app reportedly attracted a staggering 30 million sign-ups within 24 hours, making it one of the fastest-growing app downloads in history.
Twitter has threatened to sue Meta, claiming that it violated its intellectual property rights and unlawfully misappropriated Twitter's trade secrets.
In a cease-and-desist letter addressed to Meta CEO Mark Zuckerberg by Twitter's lawyer, they highlighted concerns regarding Meta's alleged systematic and wilful misuse of confidential information.
The letter also asserted that Meta recruited numerous former Twitter employees over the past year, some of whom had access to Twitter's trade secrets and highly confidential information. Twitter claims that these employees were deliberately tasked with developing Threads, using Twitter's proprietary knowledge to expedite Meta's competitive app creation, an alleged violation of state and federal laws and the employees' ongoing obligations to Twitter.
According to The Guardian, several Meta employees hired within the past year previously worked at Twitter. However, it is common for tech professionals to transition between companies, especially within social media.
Meta's communication director Andy Stone has responded to Twitter's allegations by asserting that there are no engineers on the Threads team who previously worked at Twitter.
However, Meta is not out of the woods yet. It is unable to launch Threads in EU because of the EU's Digital Markets Act while rules that digital platforms must not preference their own services on their platforms and must ensure their instant messaging services are functional with those of competitors.