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Meta Platforms (META) Loses Battle Against Privacy Violation

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Meta Platforms (META - Free Report) recently lost a legal battle in the European Union’s highest court over a German antitrust decision. The ruling restricted Meta from exploiting its dominance in social media by forcing users to share data through its services and third-party websites.

The court ruled that EU competition regulators can check if Meta follows the bloc's strict data privacy laws when they investigate its market dominance.

The court agreed with a German antitrust decision from 2019 that challenged Meta's business model of selling targeted ads based on data from its services. Meta appealed the decision, which led to the EU court's involvement.

The court stated that Meta can't use legitimate interest as a reason to process personal data for ads without users' consent. It also clarified that META should get separate permission from users to combine data from its different services.

Meta Platforms, Inc. Price and Consensus


Meta Platforms, Inc. Price and Consensus

Meta Platforms, Inc. price-consensus-chart | Meta Platforms, Inc. Quote


The ruling could lead to more scrutiny of tech giants in Europe, which has been a leader in regulating digital platforms. This decision will affect the data economy's business models in the long term.

Meta Faces Stiff Competition in the Ad Space

Meta’s prospects in the ad business is not appealing due to stricter privacy regulations and stiff competition. The recent ruling by the EU court can lead to regulating its ad business in Europe, which is the company’s major market.

On a user geography basis, ad revenue growth in Europe dropped 1% in the first quarter of 2023. Foreign currency remained a headwind to advertising revenue growth in all international regions.

Intense competition for ad dollar has been a major concern for Meta. It faces stiff competition from other social media players like Alphabet (GOOGL - Free Report) , Amazon (AMZN - Free Report) , and Snap (SNAP - Free Report) .

In the ad space, Google continues to have a significant competitive edge, owing to its scale and diversified product offerings. YouTube and Snapchat offer tough competition as far as user growth is concerned.

The Snapchat+ subscription service reached more than 3 million paying subscribers in the first quarter 2023. The company made considerable progress in diversifying revenues with Snapchat+ and sponsored AR advertising.

Strength in Amazon’s online advertising business has contributed to the company in recent times.

What Awaits Meta’s Shares in the Rest of 2023?

The Internet Software market in the United States is expected to perform well in the rest of 2023, driven by strong demand for cloud-based, AI-enabled and data-driven software solutions.

The adoption of cloud-native and platform engineering approaches, continuous technological innovations, emergence of metaverse and increased spending have been major headwinds.

Shares of Meta have gained 137.7% year to date compared with the Zacks Internet – Software Industry’s 48.9% increase in the same time frame. The uptick was primarily due to strong product pipeline, increased user engagement and constant innovation.

Meta Platforms’ generative AI tools are expected to bolster the advertising market. Significant investments and updates in Facebook, Instagram and WhatsApp is expected to have driven its user base.

This Zacks Rank #2 (Buy) company expects second-quarter 2023 revenues between $29.5 billion and $32 billion. Foreign currency headwinds are expected to be less than 1% year-over-year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Meta Platforms' second-quarter 2023 revenues has been pegged at $30.8 billion indicating a year over year growth of 6.87%. Earnings estimates have remained unchanged at $2.82 in the past 30 days.

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