Microsoft has issued a warning to investors about a potential fine it may receive from European privacy regulators due to targeted advertising practices on its social network, LinkedIn. The fine could amount to hundreds of millions of dollars as European data protection authorities increasingly use the General Data Protection Regulation (GDPR) to regulate targeted advertising on privacy grounds.
Microsoft acquired LinkedIn in 2016 for $26 billion, before the GDPR came into effect. The company disclosed on Thursday that it had received a notification from the Irish Data Protection Commission in April, indicating its intention to impose a fine after investigating a complaint from 2018. The complaint alleged that targeted advertising on LinkedIn and other platforms violated the GDPR. In response, Microsoft is increasing the size of a reserve fund and will take a charge of approximately $425 million in the fourth quarter of this year.
This follows a previous fine of 390 million euros imposed by the Irish Data Protection Commission on Meta, the parent company of Facebook, for its targeted advertising practices. Targeted advertising utilizes individual user data to personalize ads based on consumer behavior. Contextual advertising, on the other hand, displays ads based on the content of the webpage.
The Irish Data Protection Commission’s decision in the Meta case stated that the company had violated the GDPR by considering ad personalization as an integral part of the user experience, making it difficult for users to opt out without discontinuing their use of Facebook or Instagram.
Facebook has announced its intention to appeal the decision and has introduced a new legal justification for targeted advertising in Europe. The company now invokes another section of the GDPR, which permits businesses to pursue “legitimate interests,” instead of relying on the “contractual necessity” claim previously deemed illegal by European regulators.
However, some analysts believe that this change in legal basis may only provide a temporary reprieve for Meta as GDPR grants consumers an absolute right to object to direct marketing, which can override business interests. The situation highlights the ongoing challenges and regulatory scrutiny surrounding targeted advertising and privacy in the digital landscape.
