Europe could be looking at a Facebook- and Instagram-free future, according to parent company Meta’s latest annual report to the Securities and Exchange Commission.
The tech giant took issue with European privacy regulations that, it said, complicate its platforms’ functionality and ad products. Specifically, the rules prohibit cross-border transfers of user data, so Meta can’t process Europeans’ information in its U.S.-based servers.
“If we are unable to transfer data between and among countries and regions in which we operate, or if we are restricted from sharing data among our products and services, it could affect our ability to provide our services, the manner in which we provide our services or our ability to target ads,” the company wrote in the report, filed last week.
Meta believes the EU and the U.S. will succeed in striking some sort of data-sharing agreement, and regulators are crafting legislation governing how such transfers will work.
But if it doesn’t pan out, removing the apps appears to be on the table.
“If a new transatlantic data transfer framework is not adopted and we are unable to continue to rely on SCCs (standard contractual clauses) or rely upon other alternative means of data transfers from Europe to the United States, we will likely be unable to offer a number of our most significant products and services, including Facebook and Instagram, in Europe,” the filing read.
The company didn’t immediately respond to a WWD request for comment, but in subsequent remarks to the media, it seems to be in damage control mode. Representatives denied that Meta was threatening to, in essence, take its ball and go home, reframing it as a simple matter of making the commission aware of potential outcomes. It was not, they said, disclosing concrete plans.
But that may not matter if the result is the same.
The kerfuffle arrives as Meta’s stock continues to erode, following its disastrous earnings announcement last week. Shares remain down more than 28 percent since Wednesday.
Against that backdrop, the 134-page report offers a bracing read. Such 10-K filings must cover the risks facing publicly traded companies, but seeing what Meta identifies and acknowledges as threats to its business — from privacy regulations to heightening scrutiny over alleged anticompetitive practices and more — pulls the curtain back and offers some frank talk, with less spin.
Naturally, Meta’s new raison d’être looms large. Here’s the risk in its metaverse strategy, as the company sees it:
“We believe the metaverse, an embodied internet where people have immersive experiences beyond two-dimensional screens, is the next evolution in social technology.…However, the metaverse may not develop in accordance with our expectations, and market acceptance of features, products, or services we build for the metaverse is uncertain,” the company wrote.
“In addition, we have limited experience with consumer hardware products and virtual and augmented reality technology, which may enable other companies to compete more effectively than us,” it continued. “We may be unsuccessful in our research and product development efforts, including if we are unable to develop relationships with key participants in the metaverse or develop products that operate effectively with metaverse technologies, products, systems, networks or standards.”
Its goals may also distract executives and divert resource, the company added, and new laws could crop up for privacy and e-commerce that could get in the way of the business.
“As a result of these or other factors, our metaverse strategy and investments may not be successful in the foreseeable future, or at all, which could adversely affect our business, reputation or financial results,” Meta admitted.
Obviously, it doesn’t make for a great commercial. But the company seems well aware that its metaverse gambit is a major gamble. What’s less clear is if others are as well.
Update: A Meta spokesman responded to the request for comment, as follows: “We have absolutely no desire and no plans to withdraw from Europe, but the simple reality is that Meta, and many other businesses, organisations and services, rely on data transfers between the EU and the U.S. in order to operate global services. Like other companies, we have followed European rules and rely on Standard Contractual Clauses, and appropriate data safeguards, to operate a global service.”
The representative also framed the situation as a matter of urgency for companies with international operations. “Fundamentally, businesses need clear, global rules to protect transatlantic data flows over the long term,” he explained, “and like more than 70 other companies across a wide range of industries, we are closely monitoring the potential impact on our European operations as these developments progress.”