Shares of social networking star Meta Platforms (NASDAQ: META) tumbled 2.3% through 2:35 p.m. ET Friday afternoon on reports of troubles dogging its all-important advertising business, responsible for 97.5% of the revenue the company takes in, in a year.
As tech news website The Information reports, Meta’s success in ad-selling depends primarily on its ability to tailor ads to the “likes” and interests of its Facebook and Instagram users. But around the world, governments are clamping down on private corporations’ use of such personally identifiable data. In the European Union, for example, citizens have been granted the right to tell companies they only want to see ads that consider their age, gender, and “general location” when choosing which of several possible ads to display to them.
Elsewhere, India and Brazil are named as two other countries considering enacting restrictions on use of personal data. Should these and other countries follow the tack the EU is taking, it could render much of the data that Meta regularly collects effectively unmonetizable, throwing the company’s entire business model into question.
Perhaps in response to this threat, Reuters says Meta has already denied reports in the Financial Times this week, to the effect that the company is planning to introduce advertisements on its WhatsApp.
On the one hand, monetizing WhatsApp would be a logical move for Meta to make, seeing as currently WhatsApp is underperforming Meta’s other businesses in the revenue department, generating only about 3% of the company’s total annual take. It seems clear that Meta would like to grow that number if it can. And indeed, last year Mark Zuckerberg confirmed that monetizing WhasApp would lead the next wave of Meta’s sales growth. On the other hand, introducing ads on WhatsApp could fly in the face of governmental sentiment aiming to restrict ads — as well as potentially upset WhatsApp users.
Instead, it seems Meta has elected to upset its shareholders by denying it will put ads on WhatsApp. Shareholders may not like this, because it sounds like Meta is walling off an area that was supposed to be a key growth driver for its business, implying slower growth in the future.
But if the trend of governments cracking down on personal data use continues the way it’s going, Meta may have little choice but to comply.
10 stocks we like better than Meta Platforms
When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now… and Meta Platforms wasn’t one of them! That’s right — they think these 10 stocks are even better buys.
*Stock Advisor returns as of September 11, 2023
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Rich Smith has positions in Meta Platforms. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.
—
Blog powered by G6
Disclaimer! A guest author has made this post. G6 has not checked the post. its content and attachments and under no circumstances will G6 be held responsible or liable in any way for any claims, damages, losses, expenses, costs or liabilities whatsoever (including, without limitation, any direct or indirect damages for loss of profits, business interruption or loss of information) resulting or arising directly or indirectly from your use of or inability to use this website or any websites linked to it, or from your reliance on the information and material on this website, even if the G6 has been advised of the possibility of such damages in advance.
For any inquiries, please contact [email protected]
