In light of the looming regulatory risk it’s facing in Europe, Meta’s earnings call yesterday was upbeat on better than expected revenue for the quarter. The good news is that although its disclosures to investors contained a stark warning on looming regulatory risk, its overall performance was nonetheless good. This demonstrates the company’s resiliency in the face of potential hurdles and its commitment to providing quality services to its customers.
The Irish Data Protection Commission (IDPC) has announced that it will be issuing a decision in May in its inquiry relating to transatlantic data transfers of Facebook EU/EEA user data, including a suspension order for such transfers and a fine. This decision is likely to have serious implications for Facebook, as it could result in the company being unable to transfer user data between its European and American operations.
The delayed adoption of the new high level data transfer pact, which Meta hoped would resolve legal uncertainty around EU data exports, could spell the end for the company’s hopes of avoiding a lawsuit in Europe. Without an explicit agreement governing how data can be transferred between EU and US authorities, companies could find themselves at odds with local courts over their use of data.
It is still unclear when the EU institution’s will have given their final approval for the proposed deal, and if all goes as planned it could still be several months before it is finalized.
The protracted delay in finalizing the EU-Canada trade deal is raising concerns among euroskeptics in the European Parliament who say it’s indicative of a growing trend for the union to put its own interests ahead of those of its member states. While many see potential benefits to free trade with Canada, some skeptics argue that Brussels is moving too slowly and might not be able to get a good enough deal for all sides.
One implication of Meta’s earnings report is that the company is hopeful that the new EU-US data framework will be implemented soon enough to suspend its EU transfers. However, Meta also warns that it “cannot exclude the possibility” that adoption won’t happen soon enough. If this happens, Meta may have to restart its claim to have an authorized mechanism for its EU transfers, which would be a reversal of events.
In light of recent events and the pending EU-US data privacy framework, Meta is continuing to consult with policymakers on both sides of the Atlantic to determine whether the proposed framework will be fully implemented in time. If not, they will evaluate how the IDPC decision could impact their data processing operations even after a new framework is in place.
After the social networking giant reiterated its hope that the high level framework would save its bacon, CFO Susan Li warned investors that if this sought for escape hatch fails to open in time, it faces a hit of around 10% of its worldwide ad revenue – coming from ads delivered to Facebook users in EU countries. This could have an impact on the company’s profitability and future growth prospects.
meta believes that the overall impact of any EU data suspension would be difficult to predict at this point, given the limited information on what a final order could contain. In particular, it is uncertain how long the suspension would last, and whether individual member states would face additional restrictions.
It seems Meta’s ad revenue growth is strongest in regions outside of North America and Asia-Pacific. This could be due to the increasing popularity of streaming services and mobile devices in these areas, or it could simply be a result of being newer markets that are yet to saturated with advertising. Regardless, Meta has determined that it is important to focus its advertising efforts on these underserved markets in order to continue growing at a steady rate.
