Meta’s advertising revenue growth in Europe slowed again in the three months through September, the company said Wednesday, trailing its performance elsewhere and following its rollout of an option that lets users choose less personalized ads.
In Europe, ad revenue rose 18 percent year-on-year, down from the prior two quarters and well behind the 33 percent growth recorded in the US and Canada. Meta did not directly attribute the European deceleration to the Less Personalized Ads model, known as LPA, on Wednesday.
Chief financial officer Susan Li had flagged the possible effect earlier, saying in July’s second quarter results follow-up call that the company was seeing the impact of the less personalized ads offering in Europe now that it was fully rolled out, and that it may be an additional headwind. According to Dominic Ball, equity research director at market analysis firm Rothschild & Co Redburn, advertising growth in the region had fallen from around 40 percent to 24 percent over the preceding two quarters, while in the US and Canada it had accelerated from 31 percent to 33 percent. Ball told WIRED that he believes the EU’s free, personalized advertising option is contributing to the European slowdown.
Meta introduced the LPA option for Instagram and Facebook users at the beginning of this year, after EU regulators determined the company was breaching its Digital Markets Act obligation to offer consumers a choice of an equivalent service that uses less of their personal data, and fined it €200 million. The European Commission said that charging EU users who did not want their personal data used for personalized advertising for an ad-free service, a measure Meta introduced in the EU in November 2023, did not satisfy that requirement. Meta does not disclose how many people have chosen each option. Sales growth in the region has slowed since the start of the year, when the option was rolled out.
Meta says LPA uses 90 percent less data than personalized ads, with ads shown based on what a person views in a particular session on the site plus some data points such as age, location, and gender. In its response to the EU’s ruling, Meta warned that the approach leads to poorer returns for EU advertisers. Less-personalized ads are less efficient, the company said, producing fewer transactions and more ads being closed for being irrelevant or repetitive. Wednesday’s results showed the price advertisers were willing to pay per ad in Europe is not growing as fast as in the US and Canada.
Li told investors Wednesday that the company has a lot of runway to increase ad conversions and efficiency, and that it continues to find ways to enhance the actual performance of the recommendation engine. Ball believes Meta will be able to use AI to improve its ad targeting in Europe despite working with fewer personal data signals.
Investors focused much of the call on how the European situation fits into Muse, Meta’s personal AI agent launched last month. Li said the company is seeing high commercial intent from people using Muse, who ask for product recommendations, research alternatives, and compare options, which will allow Meta to eventually tap into the advertising market with that product.
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