Dividends and Meta’s advertising business under threat after EU data-privacy ruling

The world has changed and most of us start the day, use in the day and often times finish the day using technology. For all companies which provide information, they eventually need to collect information which can be sold to advertisers. It is something we all know about, but as time goes by should we click on a box to share information, or can we be only seeking information and do not want the ads? One solution is provided by YouTube which offers a premium service without ads? If you are similar to most people, the answer is it depends? If you are a company, then you want a more automatic buy in by the user.

In article by Adam Satariano of the New York Times News Service, Meta suffered a major defeat after the European Union (EU) regulators found that it had illegally forced users to effectively accept personalize ads. Meta businesses include Facebook and Instagram.

The EU has fined Meta $558 million and has the potential to require Meta to make costly changes to its advertising business in the EU. The case hinges on how Meta receives legal permission from users to collect their data for personalized advertising. The company had argued when users sign on to Facebook, Instagram and WhatsApp they effectively give permission, or they do not have to use the service.

Meta has 3 months to figure out what to do in the EU which is home to 27 countries and 450 million people. The personalize ads helped Meta generate $118 billion in revenue in 2021. The ruling puts 5 to 7% of Meta’s overall advertising at risk. The other issue is many countries outside the EU will follow the example of the EU.

Linking to dividend paying stocks, all companies are ahead of government regulations for government regulations tend to be about delayed actions. A problem arises, the government investigates, proposes new solutions and then reviews them on a semiannually to yearly basis. The government is behind the industry, but it wants to cut back on the worst of the practices of the industry. It is not surprisingly for companies to be sued and that is why they have business to government roundtables where they can discuss issues and possible solutions. Sometimes public opinion moves one way or the other and governments have to react. The issue is does your investments try to do the right thing. No company is perfect but if they try, then governments will give them time to change. If not, the government should pressure the company to change.

There are more questions than answers, till the next time – to raising questions.


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