FB might have renamed to Meta, but the lawsuits aren't going away - this time its for misguiding investors

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Meta is being sued for misleading investors about its mitigation efforts to counteract the impact that Apple’s iOS14 privacy changes would have on its business. The tech giant is alleged to have “painted a false and misleading picture” about the effectiveness of mitigation efforts it put in place to counteract the changes.

It was only this February that Meta disclosed its mitigation efforts had not been “manageable” against the effects of Apple’s privacy changes, thus leading the firm to lose US$10 billion in revenue.

According to the lawsuit filed by US pension fund Plumbers and Steamfitters Local 60 Pension Trust, Meta touted efforts including:

Requiring less data in targeted ad campaigns;
Building other data sources that advertisers could make use of;
Having more onsite conversion opportunities for advertisers;
Closing a supposed “underreporting gap” to identify a supposedly more robust and more accurate ROI for advertisers; and
Automation to allow advertisers to leverage machine learning to find audiences for targeted ad campaigns.

The lawsuit alleged that Meta and its senior management “knowingly or recklessly failed” to tell investors that Apple’s iOS privacy changes were having a material impact on Meta’s ability to offer the type of targeted advertising that its customers wanted and, as a result, customer ad spending was “dropping precipitously”.

It added that Meta’s mitigation efforts were either not properly implemented or ineffective and that Meta’s measurement of ads was not accurate as mitigation efforts were failing. At the same time, the lawsuit accused Meta of not having a plan in place to properly address the impact of the iOS privacy changes.

“Meta and its senior executives failed to disclose known trends related to an exodus of Facebook and Instagram users to rival social media platform TikTok,” the lawsuit said. In an attempt to counter this, Meta was alleged to have “cannibalised itself” by pushing revenue-generating business away from Facebook Stories and elsewhere to its “lower margin Reels video function”. As a result of Meta’s “wrongful acts and omissions” resulted in the “precipitous decline” in its market share value which in turn led to significant losses and damages for shareholders, the lawsuit said. Meta declined to comment.

Meta has been reeling from the impact of Apple's iOS privacy changes. While Meta’s ad revenue for Q4 2021 jumped 20% year-on-year to US$32.63 billion, CFO Dave Wehner said the impact of the iOS overall as a headwind on its business in 2022 is on the order of US$10 billion. It also witnessed slowing growth for its apps, with global monthly active users for Facebook stagnating at 2.91 billion from the previous quarter. The grim financial results led Meta's market capitalisation to drop by 26%.

Meanwhile, Meta's COO Sheryl Sandberg said during the financial earnings call in February that Apple's iOS changes will continue to be a factor this year. In Q3 2021, Meta said Apple created two challenges for advertisers: the decrease in accuracy of ad targeting and the increase in difficulty in measuring those outcomes. Meta previously spoke up against Apple's privacy changes. Although it complied with Apple's privacy settings last year to show Apple's prompt for consumers to gain permission in obtaining their data, Meta said in a blog post that it disagreed with Apple's approach and solution. However, it has no choice but to show Apple's prompt otherwise the Facebook app will be blocked from the App Store.

Photo courtesy: 123RF