Meta Earnings Call yesterday He was optimistic about better-than-expected revenue for the quarter. Hidden in its investor disclosures, however, is a stark warning about the looming regulatory risk it faces in Europe, where a decision is expected in a matter of weeks (by May 12) that could see the tech giant ordered to suspend its transatlantic data flows.
“We expect the Irish Data Protection Commission (IDPC) to issue a decision in May in its previously disclosed inquiry relating to EU/EEA transatlantic transfers of Facebook user data, including a stop order for such transfers and a fine.” , wrote the financial director of Meta. in its Report Q1 2023.
We’ve covered the (very) long-running saga, which hinges on a clash between US surveillance laws and EU privacy rights, most recently. here and here. So regular TechCrunch readers will already know that a key development Meta hopes will save its bacon in Europe is the adoption of a new high-level data transfer pact that aims to resolve legal uncertainty surrounding exports of EU data.
However, the negotiations on this replacement agreement have taken longer than expected and the EU institutions are still reviewing the draft decision that the Commission announced in December. So while the bloc had initially suggested the deal could be finalized by the end of 2022, it was forced to revise the estimate, saying in December that it hoped it would all come to fruition. before july.
Since then, multiple EU institutions involved in reviewing the deal have been raising concerns – so there’s still no firm word on when exactly the thing might be done. (Or, indeed, whether a new deal will survive the inevitable legal challenges, given that the previous two pacts were invalidated by the EU Court of Justice.)
In its earnings report, Meta tells investors that it is hopeful that the new EU-US data framework. an authorized mechanism for your EU transfers and remove the stop order; however, the company also cautions that it “cannot exclude the possibility” that adoption may not occur soon enough to prevent such an order.
“Our ongoing consultations with policy makers on both sides of the Atlantic continue to indicate that the new EU-US data privacy framework. The proposed US will be fully implemented before the deadline for the suspension of such transfers, but we cannot exclude the possibility that it will not be completed. in time”, writes Meta. “We will also assess whether and to what extent the IDPC decision could affect our data processing operations, even after a new data privacy framework comes into force.”
During a call with investors, the social media giant was asked about the potential impact on revenue if it is forced to suspend data flows between the EU and the US by regulatory order. In response, CFO Susan Li began by reiterating her hope that the new senior framework will save her bacon. However, if this sought-after escape hatch is not opened in time, he warned investors that Meta faces a hit of around a tenth of its worldwide ad revenue, saying “about 10%” of this comes from ads delivered to Facebook users in EU countries. .
Li cautioned against the disclosure, saying it is difficult for Meta to forecast the overall impact of any EU data suspension at this time, given that it lacks information on what a final order would contain, such as the duration of a suspension.
Earlier on the call, Meta’s CFO offered a breakdown of ad revenue growth by region, saying it was strongest in the “Rest of World” segment (9%) during the quarter, followed by North America and Asia- Pacific (6% and 4%). %, respectively), while he specified that Europe had decreased by 1%.
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