Meta’s Ad Sales Are Suffering Now That Europeans Can Pick Less Personalization
An earnings briefing on Wednesday revealed ad revenue has slowed since the European Union introduced the Less Personalized Ads models at the beginning of this year.
Meta's advertising revenue in Europe slowed in the three months leading up to September, coming in below its global performance, according to the company's latest report. The European growth rate of 18 percent year-on-year was slower than the US and Canada's 33 percent growth. The company's chief financial officer, Susan Li, had previously expressed concerns over the impact of the less personalized ads model launched in Europe, stating during the second quarter results call in July that it might pose an additional challenge.
The LPA option, introduced by Meta at the beginning of the year following EU regulations, allows users to opt for less personalized ads in exchange for a more private browsing experience. However, this move has contributed to the slowdown in advertising growth in Europe, with the region's growth decelerating from a 40 percent yearly increase to just 24 percent.
In contrast, growth in the US and Canada has accelerated from 31 percent to 33 percent. Meta claims that the LPA option reduces data usage by 90 percent compared to personalized ads, using information such as the user's age, location, and gender to serve ads. This leads to lower returns for advertisers, as the ads are less relevant or repetitive, resulting in more users closing them.
Advertisers are also paying less for ads in Europe due to the lower efficiency of these ads, according to Meta's latest report. Li stated that the company has ample resources to improve ad conversions and efficiency, with plans to use AI to enhance recommendation engines in Europe. Despite working with fewer personal data points, Li believes Meta can leverage AI to improve ad targeting in the region.
Investors were keen to learn how this situation ties into Meta's personal AI agent, Muse, which has shown high commercial intent among users.
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