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April 28, 2023

Meta says that about 10% of its global advertising revenue is at risk

Risk due to EU orders regarding data flows

Meta, recently reported better-than-expected revenue for Q1 2023 in its earnings call. However, buried within its investor disclosures is a warning regarding a regulatory risk it is currently facing in Europe, where a decision is expected in the coming weeks. The Irish Data Protection Commission (IDPC) is set to issue a decision by May 12th regarding Meta's transatlantic data transfers. This decision could include a suspension order and fine for such transfers of Facebook EU/EEA user data. The issue stems from the clash between US surveillance laws and EU privacy rights.

As we have previously reported, Meta is hoping to resolve the legal uncertainty around EU data exports with the adoption of a new high-level data transfer pact. However, negotiations over this replacement deal have dragged on longer than expected. Multiple EU institutions have been raising concerns, and there is still no firm word on when the deal might be done.

Meta is hopeful that the new EU-US data framework will arrive soon enough to be implemented before the deadline for a suspension of its EU transfers. If this happens, it could reboot its claim to have an authorized mechanism for its EU transfers and avoid the suspension order. However, the company warns that it “cannot exclude the possibility” that adoption won’t happen soon enough to prevent such an order.

During the earnings call, CFO Susan Li acknowledged that Meta is facing a hit of around 10% of its worldwide ad revenue if it is forced to suspend EU-US data flows on regulatory order. She clarified that roughly 10% of this comes from ads delivered to Facebook users in EU countries. Meta hopes that the impact won't be that severe, but it's difficult for the company to forecast the overall impact of any EU data suspension, given the lack of information on what a final order would contain.

Meta's CFO is hoping that a new high-level data transfer pact will save the day. But if it doesn't happen soon enough, Meta could lose around 10% of its worldwide ad revenue. Despite ongoing consultations with policymakers on both sides of the Atlantic, there is still no firm word on when the new EU-US data framework will arrive, or whether a new deal will survive the inevitable legal challenges.

Neil Hodgson Coyle
Neil Hodgson-Coyle
Editorial chief at TechNews180
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