EU on the Verge of Prohibiting Personalized Ads, Overlooking Potential Economic Impact on European Businesses
The internet has revolutionized advertising, offering opportunities unavailable in traditional marketing. One such method, personalized advertising, has become a significant contributor to Europe's digital economy, supporting small and medium-sized enterprises (SMEs) and generating substantial economic activity and employment [2].
Personalized ads allow SMEs to reach specific audiences efficiently, improving business outcomes through tailored promotion. This approach reduces entry barriers and offers affordable access to digital marketing tools, empowering SMEs to grow [1]. In 2024, Meta's personalized ads in the EU generated €213 billion in economic activity and supported 1.44 million jobs [2].
However, this ecosystem faces regulatory challenges in Europe. Strict data privacy rules, such as the GDPR, and emerging regulations, including bans or restrictions on targeted ads and political advertising, may diminish the effectiveness and availability of personalized advertising services [1][2][3]. This uncertainty can lead to increased costs, reduced ad performance, or shifts back to less targeted traditional media for SMEs [1].
Moreover, evolving regulations focus on protecting users with measures against dark patterns and promoting transparency, which while beneficial for consumer rights, can impact how personalized advertising is deployed and monetized [5].
Study after study has shown that cookie-based targeted ads are up to 70 percent more valuable to advertisers than non-targeted ads [6]. Charging users directly for access is a monetization option, but it requires offering a particularly useful or popular product [7]. Some businesses have added an online offering to generate more sales, while others are online-first and need to monetize exclusively through their website or mobile app [7].
When Apple introduced a change that made tracking more difficult, some advertisers saw their customer acquisition cost shoot up three-fold [8]. Margrethe Vestagher, Executive Vice President of the Commission, has stated that it is legitimate to advertise to try to find the people with whom you want to communicate [9].
The EU Commission's original proposal for the Digital Services Act (DSA) did not propose amending existing rules on consent and the right to object to processing of personal data [9]. However, amendments have been added with the aim of bringing about a de facto ban on personalized ads [4].
In summary, personalized advertising currently contributes massively to Europe's internet economy and SME marketing by enabling targeted, efficient advertising and job support. However, EU regulatory pressures risk undermining these benefits by restricting data use and ad targeting capabilities [1][2][3][5]. This tension between privacy protection and economic growth requires careful navigation to ensure the continued success of the internet economy and SMEs in Europe.
References:
- EU Regulations and Personalized Advertising: A Threat to SMEs
- The Economic Impact of Personalized Advertising in Europe
- The Impact of EU Regulations on Personalized Advertising
- EU's DSA Amendments: A De Facto Ban on Personalized Ads
- The Role of Transparency and Consumer Protection in Personalized Advertising
- The Value of Targeted Advertising
- Monetizing Online Businesses: Strategies for SMEs
- The Impact of Apple's Privacy Changes on Advertisers
- Interview with Margrethe Vestagher on Digital Services Act
- Strict regulations such as the GDPR and emerging privacy rules in Europe pose challenges to the effectiveness and availability of personalized advertising services, potentially increasing costs, reducing ad performance, or leading SMEs to revert to traditional media.
- The Personalized ads have been instrumental in Europe's digital economy, supporting SMEs, generating substantial economic activity, and employment, with platforms like Meta generating €213 billion in 2024 alone.
- The trend of using data-driven technology in personalized advertising, including AI and data collection, faces regulatory scrutiny as laws focus on protecting users through measures against dark patterns and promoting transparency, which can impact how ads are deployed and monetized.
- While studies show that cookie-based targeted ads are 70 percent more valuable to advertisers, charging users directly for access is a monetization option, but it requires offering a particularly useful or popular product.
- Amendments to the EU's Digital Services Act (DSA) aim at bringing about a de facto ban on personalized ads, potentially undermining the benefits personalized advertising offers to the internet economy and SMEs in Europe.
- Despite the regulatory pressures, it is crucial to navigate this tension between privacy protection and economic growth to ensure the continued success of the internet economy and SMEs in Europe, as personalized advertising plays a significant role in SME marketing by enabling targeted, efficient advertising and job support.
