Updated at 10:48 am EST
Meta Platforms (META) – Get Free Report shares slumped lower Tuesday following a report from the Wall Street Journal that suggested European Union officials are poised to crack down on the social media group’s practice of running targeted ads across its Facebook and Instagram services.
The Journal reported that a panel representing the European Data Protection Board, a group focused on data privacy and consumer protection, has ruled against Meta’s practice of offering users the chance to ‘opt-in’ to agreements that allow it to create targeted ads based on their online activity.
The panel’s ruling will be reflected in decisions expected from the Data Protection Commission of Ireland — the location of Meta’s European headquarters — which could then seek fines from Meta or request changes to its ad-selling structure, the paper reported.
Meta shares were marked 6.1% lower in early Tuesday trading to change hands at $114.96 each, a move that would extend the stock’s year-to-date decline to around 676%.
The potential crackdown comes at a difficult time for Meta, which unveiled its first-ever job cuts last month amid a slump in global ad sales and investor concern over its decision to “meaningfully” ramp-up investments in Reality Labs, the division that will house the company’s metaverse plans, despite more than $9.4 billion in losses over the first nine months of the year.
The choice to double-down on the expensive enterprise, which will add at least another $4 billion to next year’s capital spending plans — now pegged at between $30 billion to $34 billion for the coming year — more than offset some modest positives from Meta’s underlying social media business.
CEO Mark Zuckerberg has also lamented App Tracking Transparency (ATT) rules put in place by Apple AAPL last year that have made it difficult for Facebook to measure the success of some of ad campaigns, resulting in delayed or restricted data.
In response, the group has had to boost spending — and hiring — on AI and machine learnings tools to help define user preferences make targeted ads more attractive.
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