Meta Platforms (META) Facing Legal Issues From EU Commission
Meta Platforms META recently got a warning from the European Commission for breaching the European Union's (“EU”) antitrust laws over its online classified advertising practices on the Facebook Marketplace.
The EU is blaming Meta Platforms for distorting competition in the Facebook marketplace for online classified advertisements. The EU is investigating further and is considering imposing a fine of 10% of the company's global annual revenues. This would negatively impact the company’s already failing top line even further.
This is not the first time META has faced the EU in a legal tussle. Its social media platforms are facing legal issues from global authorities due to the lack of user data protection and misuse of data. In September 2022, Instagram was slapped with a €405 million fine by Ireland’s data regulators for violating the EU’s General Data Protection Regulation and failing to protect children’s information.
META, along with its other social media peer Snap SNAP, is facing backlash from users due to child protection issues on the social networking platform.
Snap’s Snapchat platform announced new parental controls for its platform early this year to limit friend suggestions for teen users and protect them from unwanted attention.
Snapchat’s recent initiatives come following allegations that the company has been failing to prevent drug-related content from proliferating its chatting platforms, specifically among its users aged below 18.
The legal issues have cost Meta Platforms a lot of capital amid a volatile macroeconomic situation, further reducing the company’s top-line growth in the last reported quarters of 2022.
Meta Platforms, Inc. Price and Consensus
Meta Platforms, Inc. price-consensus-chart | Meta Platforms, Inc. Quote
Revenues from Family of Apps (99% of total revenues) in the third quarter, which includes Facebook, Instagram, Messenger, WhatsApp and other services, decreased 3.6% year over year to $27.43 billion.
This is due to a decline in its advertisement revenues, representing 99.3% of Family of Apps revenues. In the third quarter, advertising revenues decreased 3.7% year over year to $27.24 billion and accounted for 98.3% of total revenues. The Family of Apps is the primary source of funding for META’s lofty metaverse dream, upon which the company is banking its future.
Meta Platforms is facing the worst downturn in its operational history. Its ad revenue business is facing declining growth due to ad targeting-related headwinds created by Apple’s AAPL iOS changes.
Apple’s iOS changes have made ad targeting difficult, which has increased the cost of driving outcomes. However, measuring these outcomes is tough.
However, in order to deal with child protection and user data protection issues, META has been investing heavily in AI to attract more users to the platform and increase top-line growth to meet its future goals of creating the metaverse upon which the company is banking its future.
Meta Platforms Investing in AI to Boost Prospects
META, which currently carries a Zacks Rank #3 (Hold), is banking on its revenue growth on solid return on investments from its investment in AI and ML and strategic partnerships. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Meta Platforms is launching features like protections against malicious links in Facebook messenger and Instagram direct messages using automated systems, Instagram impostor alerts and increased Instagram verified badge specialty.
META also announced the introduction of age verification technology to Facebook Dating in the United States to prevent users under the age of 18 from accessing experiences meant to be enjoyed as adults.
However, building the metaverse is a collective effort. As such, Meta Platforms is making strategic partnerships with PyTorch co-founder Microsoft MSFT to develop and architect the required AI models for the metaverse.
Microsoft is bringing new work and productivity tools to Meta Quest Pro and Meta Quest 2 next year. These include apps like Microsoft Windows 365 and Microsoft Teams and the ability to join a Teams meeting from inside Meta Horizons Workrooms, which will help create a seamless working experience in the metaverse.
Meta Platforms’ recent investments to launch features to protect user data will likely boost user confidence amid stiff competition.
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