Meta-Digital Markets Act Investigation

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Overview

Under DMA Article 5(2), gatekeepers must give users a “clear, specific, freely given choice” regarding data use.
“Pay or Consent” model gives users a choice between (a) paying a subscription for ad-free service, or (b) using the service for free but allowing personalized, cross-service data use (for advertising).
The EU Commission has continuously said the “Pay or Consent” model doesn’t meet the requirements of the DMA and seems to be championing for another form that’s completely free of ads.

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Investor Takeaway

The DMA is a material but manageable headwind for Meta, with potential EU fines and ad revenue losses (around $4 billion in 2025 and $8 billion in 2026), but most users will likely stick with ads and Meta’s AI tools can offset the impact. </aside>

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Prediction

Revenue headwind of around $3.8 billion in 2025 and $9.0 billion in 2026 (estimates in Google Sheet) if Meta comes up with a new model that’s completely ad free and most users choose it.
Fines of $4.0 billion in 2025 and $8.0 billion in 2026 if Meta chooses to make no further changes to the model as reported by Reuters. </aside>

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Bullish Arguments

Most users are likely to choose ads (which they may not notice even) due to the annoyance factor of unskippable ads.
Like during the Apple’s ATT changes in 2022, Meta’s core AI team will likely come up with ways to compensate this headwind.
President Trump’s support for Big Tech companies against EU rules and the ongoing tariff negotiations play in Meta’s favor against the DMA changes and fines. </aside>

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Bearish Arguments

EU seems determine to implement GPDR rules which would require Meta to come up with consent model that’s completely free from ads. </aside>