Regulators in Europe have the power to penalize Meta and alter its data gathering practices.
According to The Wall Street Journal, Meta Platforms may be responsible for breaking European privacy laws known as the General Data Protection Regulation, which went into force in 2018. The European Data Protection Council acknowledged that it had reached a conclusion, but it would not make it public for at least one month. We think that Meta might ultimately pay up to $13 billion in fines (or approximately 4% of sales since the laws went into force), despite the fact that the business is probably going to appeal, which the Journal notes will be a drawn-out process.
Additionally, such a solution may result in a steady decline in the cost of advertising on Meta sites, which would make contextual advertising more appealing to advertisers than the targeted advertisements for which Meta is known. We believe that a downgrade of this scale is the worst possible outcome, and Meta has enough unknowns and backup plans available to maintain our current projections. We think the stock is appealing notwithstanding the GDPR ruling.
GDPR demands user consent before utilizing data, such as online user activity, for targeted advertising; but, if this data is deemed required for the service, the user shall be given the option to accept the terms or decline access to the site or application.
Business Plan and Future Prospects
With about 3 billion monthly active users, Meta is the largest social network in the world. Meta platforms are very appealing to marketers because of the rising user base, their engagement, and the valuable data they produce. The firm will have a decent chance of increasing the top line and cash flow because of the combination of these priceless assets and our assumptions that advertisers would keep shifting their expenditure online.
Meta draws people and boosts their engagement by offering extra features and programs within its ecosystem. We think the business will keep gathering more data, which Meta and its advertising clients will use to create online ad campaigns targeted at particular individuals, as a result of consumers sharing more videos and photographs with friends and family and the social graph's continuous growth.
Although the usage of consumer data is being scrutinized, we think that Meta's sizable audience will continue to draw in advertising revenue. Because they anticipate a strong return on investment from these focused efforts, advertisers are ready to pay more for advertisements, as seen by Meta's growth rate of average ad revenue per user.
Meta will keep profiting from the expansion of marketing and advertising budgets allocated to online advertising, notably for advertising on social networks and videos, where Meta holds a particularly advantageous position.
The Facebook app, along with Instagram, Messenger, and WhatsApp, is one of the most widely used apps on Android and iPhone smartphones worldwide. Meta is working to monetise its different apps even more, including through the growth of e-commerce and interactive video advertising. Additionally, the business incorporates virtual, augmented, and artificial intelligence technology into a variety of goods, which can further improve Meta users' participation and contribute to future attractive revenue growth from advertising.
What does bulls say?
- Meta provides the largest audience and the most usable data for online advertising on social networks, with more users and more time spent online than any other social network.
- The growth of Meta's advertising income per user shows how valuable cooperating with the firm is for marketers.
- User engagement will rise as a result of the incorporation of AI technology into Meta's numerous offers and the release of VR goods, which will boost advertising income.
How do the bears respond?
- Since Meta is now a "one-take pony," it will suffer greatly if online advertising stops expanding or if more advertising revenue shifts to other businesses like Google or Snapchat.
- Although Meta's user base is expanding quickly, many of its users may also be active on other social networks like Snapchat or TikTok. As a result, the business will have to fight continually to claim the user's time and interactions with its assets.
- Regulations that restrict the application and gathering of information on users and their usage, as well as the acquisition of information that will affect that use and growth, may be implemented.