Meta’s advertising growth in Europe is slowing now that residents have the option for less of their personal data to influence what advertisements they see.
Advertising revenue in Europe continued to decelerate in the three months through September, the company said on Wednesday, underperforming its global figures. In the region, advertising revenue grew 18 percent year-on-year, slowing from the previous two quarters and lagging the 33 percent growth seen in the US and Canada.
Though Meta did not explicitly blame the introduction of the Less Personalized Ads model on Wednesday, chief financial officer Susan Li had previously warned “we’re seeing the impact of less personalized ads offering in Europe now that it’s fully rolled out, and that may be an additional headwind,” in July’s second quarter results follow-up call. The preceding two quarters had seen advertising growth fall from around 40 percent to 24 percent; in the US and Canada, it had accelerated from 31 percent to 33 percent, according to Ball.
“We believe the EU’s free, personalized advertising option is contributing to the European slowdown,” Dominic Ball, equity research director at market analysis firm Rothschild & Co Redburn, told WIRED.
Meta began to offer Instagram and Facebook users the LPA option at the beginning of this year, after EU regulators ruled that it was breaching its Digital Markets Act obligation to give consumers the choice of an equivalent service that uses less of their personal data and hit the firm with a €200 million fine. Sales growth has slowed in the region since the start of the year, when Meta rolled out the option. The European Commission said that charging EU users who did not want their personal data used for personalized advertising for an ad-free service, a measure Meta introduced in the EU in November 2023, did not satisfy this. Meta does not disclose how many people have chosen each option.
LPA uses 90 percent less data than personalized ads, Meta says, with ads shown based on what a person sees in a particular session on the site, plus some data points like their age, location, and gender. It leads to poorer returns for EU advertisers, it warned in a response to the EU’s ruling. Less-personalized ads are less efficient, leading to fewer transactions, and more ads being closed due to being irrelevant or repetitive, it said. Indeed, the price advertisers were willing to pay per ad in Europe is not growing as fast as in the US and Canada, Wednesday’s results showed.
Li told investors on Wednesday the company has “a lot of runway” to increase ad conversions and efficiency, as it is “continuing to find ways to either enhance the actual performance of the recommendation engine.” Rothschild & Co Redburn’s Ball believes the company will be able to use AI to improve its ad targeting in Europe despite working with fewer personal data signals.
Investors were keen to understand how this fits into Meta’s personal AI agent, Muse, launched last month, questions about which dominated the call. Li said the company is seeing high commercial intent from people using Muse—asking for product recommendations, researching alternatives, and comparing options—which will allow them to eventually tap into the advertising market with that product.