Industry views: What Meta's estimated US$400 million fine in EU means for personalisation

Ireland’s data privacy regulator has fined Meta over US$400 million this week for breaches on both its Facebook and Instagram services related to targeted advertisements that are sent to users based on their online activity. The regulator said that both Facebook and Instagram must reassess the legal basis of how they run advertising based on personal data in the European Union, according to The Straits Times.

The ruling was related to a change Facebook and Instagram made to its terms of service in 2018 following the introduction of new EU privacy laws. In this, Meta considered a contract to be entered into upon a user’s acceptance of its updated 2018 terms, which would allow them to use their personal browsing history for targeted advertising. At that point, the act made such advertising lawful. The ruling means that Meta will no longer be allowed to use a user’s personal browsing data to send them targeted advertisements.

The issue around data privacy and the usage of data has long been at the heart of discussion within the marketing industry. 

When it comes to marketing, personalisation is extremely important. According to research from McKinsey, companies that excel at personalisation generate 40% more revenue from those activities than average players. The study added that players who are leaders in personalisation achieve outcomes by tailoring offerings and outreach to the right individual at the right moment with the right experiences.

The study also said that 72% of consumers said they expect the businesses they buy from to recognise them as individuals and know their interests. When asked to define personalisation, consumers associate it with positive experiences of being made to feel special. True enough, as the world moves forward, consumers are looking for ads that are focused more on them.

The importance of personalised ads is likely why Meta has told media sources that it will be arguing against the decision and that it plans to appeal both the ruling and the fines, according to the Wall Street Journal. Saying that, the issue here is not about the personalisation of content but rather about how to ethically go about getting consent for such personalised ads.

Personalisation isn't about to go anywhere

Joe Nguyen, senior strategic advisor at H+ shared that the main concern here is that the ruling could extend beyond just Meta and that it affects all platforms and publishers. This would in effect be more detrimental to the 'open internet' which has been trying to figure out targeting in a post cookie world, and now must face targeting where they can no longer use their own traffic data from their users, explained Nguyen.

Ranganathan Somanathan, the co-founder and curator of RSquared Global Ventures, a business consulting service, agreed by saying that the marketing industry has been grappling with ways to improve marketing effectiveness as they face the imminent collapse of third-party data fueled by cookies. "The collapse of third-party targeted data coupled with the regulations on first-party data collection will severely erode marketing effectiveness," he warned. 

"However, in my opinion, regulators and digital platforms will find a middle ground that will continue to allow for the digital ecosystem to be underwritten by advertising revenue. In the interim, marketers should enhance their capabilities around contextual engagement and content driven marketing. This will allow them to still continue to build quality reach amongst their prime prospects," he concluded.

In Asia, sensitivities amongst people of data privacy is still nascent. Vast majority still appreciate personalised advertisement and content being delivered to them. As such, even when privacy contract between publisher, platform and people become more explicit, there might have limited erosion of targeting capabilities, he added. This gives a longer runway for marketers in the region to rebalance their focus from purely bottom of the funnel to a full funnel optimisation, experimenting with content, context, passion, and moment based marketing to connect with their audiences.

Adding to the conversation, Anthony Yiu, the CEO of PHD Hong Kong, a media agency said that PHD Hong Kong’s Luxury Gen Z report found that GenZ often resonate with brands based on personal suitability and common values shared between them and the brand. This generation isn’t one that will suit themselves to suit the brand, but rather the brand must come across as one which understands them.

“With the eventual phasing out of third-party data, marketers will need to speed up the deployment of their Customer Data Platform (CDP) and start building a genuine one-on-one relationship with their customers. After all, brands today need to create and enhance their value exchange with their customers,” he added. When it comes to targeted advertising, brands need to reach consumers who are genuinely interested in what they have to offer and with products or messaging that adds value to them than just broad stroke blasting, said Yiu.

Drawing the line

“While social platforms like Meta have added tremendous value to users and businesses alike; and they need, for now, ad sales-based revenue to support their infrastructure,” said Siddharth Surana, the chief operating officer of Media360 Communications. Nonetheless, he added that there is a need for regulatory oversight to stop the relentless collection and misuse of users’ personal data by large tech platforms and this ruling helps clarify what is and isn’t acceptable.

The importance of personalised ads is likely why Meta has told media sources that it will be arguing against the decision and that it plans to appeal both the ruling and the fines, according to the Wall Street Journal.

Chanchal Chakrabarty, CEO for GroupM Malaysia shared that any ‘online activity’ outside of Meta platforms can’t and should not be used by Meta to send personalised ads. “What a user does outside of their platforms is nothing but what privacy is/should be defined as,” he said. So should Meta have used the activity outside of its platform, it would be a blatant manipulation of ad activity on their own platform.

“If a user has not searched or engaged with any brand on a Meta platform but is being served ads of products/brands that the user searched outside of the platform, then it should fall under privacy breach,” he added.

However, as personalisation takes more of a centre stage, so does the conversation on data ethics. In such a landscape, Jeffery Lim, the founder of digital agency 8traordinary, said, “Content marketing, though more costly, should also be apportioned more in the marketing mix."

Somanathan added that in the interim, marketers should enhance their capabilities around contextual engagement and content driven marketing. This will allow them to still continue to build quality reach amongs their prime prospects. “This could be an immediate action that helps them to navigate through the turbulence of the digital governance,” he said.

In the mid to long term, even as the regulations become clear and reach some semblance of equilibrium, marketers should also start exploring emerging solutions like Data Unions, said Somanathan. Data unions seeks to redistribute control and therefore share of advertising revenue back to the people.

Related articles:
H&M taps into metaverse with immersive Roblox experience
Regal Hotels unveils MetaGreen in The Sandbox
Study: Metaverse impact on Asia's GDP to hit up to US$1.4 trillion by 2035