Meta’s Paid Subscription Model and Its Implications for European Online Advertising

European users of Facebook and Instagram have recently received a message from Meta, providing them with the choice to pay a monthly subscription of 12,99 € to use Facebook and Instagram without any ads or to continue to use these services for free while seeing ads that are relevant to them. 

What does this mean for agencies?

Agencies can be advised to be attentive over the following days to analyse to what extent changes can be observed regarding efficiency in ad delivery on Facebook and Instagram Business platforms.

If it is to be expected that most users will continue to use Meta’s services for free and thus accept targeted ads, this should, however, be double-checked in terms of numbers. 

What the EU Privacy Watchdog’s ‘consent’ obligation on Meta means for the future of online advertising  

On October 27, the European Data Protection Board, the EU Privacy Watchdog, adopted an urgent binding decision instructing the Irish (IE) Data Protection Authority to impose a ban on Meta Platforms Ireland Ltd. regarding the processing of personal data for behavioural advertising on the legal bases of contractual necessity and legitimate interest across the entire European Economic Area (EEA). The European Data Protection Board has relied on the Court of Justice of the European Union (ECJ) position adopted on July 4 2023 (Case C-252/21), obliging Meta to rely on consent as a legal basis for the processing of personal data of users within the EU. 

Why has the European Data Protection Board sanctioned Meta in relying on contractual necessity and legitimate interest as a legal basis under Article 6 of the GDPR for the processing of users’ personal data in the EU?  

The ECJ position on “legitimate interest” as an insufficient legal basis for delivering personalised advertising 

The ECJ case clarifies that “legitimate interest” would be insufficient as a legal basis to address personalised advertising based on the processing of personal data. In this context, the ECJ considers that the interests and fundamental rights of users override the interests of a social network provider in offering personalised advertising (without explicit user consent) because users cannot reasonably expect such use of their personal data – even if such social network services are offered free of charge. 

The ECJ position on “contractual necessity” as an insufficient legal basis for delivering personalised advertising 

The ECJ confirmed in its judgment the European Data Protection Board’s previously adopted binding decisions (3/2022, 4/2022) regarding the insufficiency of Meta’s legal basis of contractual necessity for personalised advertising. The Court states that : “(…) users must be free to refuse individually, in the context of the contractual process, to give their consent to particular data processing operations not necessary for the performance of the contract, without being obliged to refrain entirely from using the service offered by the online social network operator, which means that those users are to be offered, if necessary for an appropriate fee, an equivalent alternative not accompanied by such data processing operations.”

In short, the European Data Protection Board considers that Meta can offer Facebook and Instagram without personalised advertising. And to the extent that this is possible, Meta thus cannot rely on the “necessity for the performance of a contract” basis for data processing under Article 6 of the GDPR. 

Meta has already moved to a “Pay for your Rights” approach and paved the way for further legal proceedings.

Meta has started to give users in the EU, EEA and Switzerland the choice to pay a monthly subscription of 12,99 € to use Facebook and Instagram without any ads, or they can alternatively continue to use these services for free while seeing ads that are relevant to them. 

This raises a fundamental question regarding revenue models within the online advertising space. Many publishers have relied on the “pay or okay” approach to sustain the economic viability of journalistic sources when advertising revenues have increasingly shifted towards the platforms. However, advertising has proven to be an essential source of revenue for many publishers to pay journalists who are providing relevant editorial content. If this can raise questions in terms of independent journalism, it is, however, an essential source of revenue to sustain an economic model. Likewise, the question as to the extent these ads need to rely on the processing of personal user data remains perfectly valid here as well. In any case, it is this possibility, which Data Protection Authorities have granted to online publishers in the first place, that Meta is now using to shift towards a “pay for your rights” approach.

How is the online advertising space likely to evolve looking forward?

Privacy concerns have risen over the last decade, and policymakers are progressively narrowing the legal opportunities for this step by step. The announced phasing-out of third-party cookies on Chrome is a prominent example of marketing practices shifting in this field, knowing that third-party cookies are already disabled by default on Safari and Firefox.

Looking ahead, if users are not targeted based on their personal data when browsing the web, it seems unlikely that they will continuously need to pay for this not to happen on any major social media platform, mainly when the business models of those platforms primarily rely on the monetisation of user-generated content. The real question behind this is to what extent is the processing of personal data necessary for efficient ad delivery? Legal frameworks and marketing practices are likely to continue to shift progressively towards ad delivery, which does not rely on the processing of personal data.

What are the next steps?

NOYB, one of the most prominent data protection organisations, has already announced that it will challenge Meta’s solution in Court. It is likely that if the matter were brought again in front of the European Court of Justice, the notion of “free and informed consent” under GDPR would not be met by the current model Meta has put forward about the dominant position Meta finds itself in. This is, however, only hypothetical at this stage.

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