In Europe, Instagram Ads Are About to Get Less Personal

The less-personalized format will show European users what Meta calls contextual ads based on content that a user sees during a given browsing session, rather than a user’s broader activity history, like the ads most users now see peppered into their feeds and stories on Meta’s apps. Some of the new ads—which will also be targeted based on age, gender and location—will cover the whole screen and be unskippable for a few seconds. 

Meta’s new ad option comes amid pressure from European Union regulators who say users should have access to a free version of the company’s apps with less-personalized ads. It is unclear if the new concession will satisfy EU regulators.

Meta has long resisted giving users a no-fee way to avoid having their in-app digital activity used for advertising purposes because it risks cannibalizing the company’s main source of revenue: highly targeted ads selected using data it gathers about its users, including which posts they share and which videos they watch. The company also says personalized ads make for a better experience for users and advertisers.

The financial consequences of the move aren’t clear and partly depend on how many users change their ad preferences. Meta has told European regulators that it expects the less-personalized ads option to have a negative impact on its business. The greater Europe region that includes the EU accounted for 23% of Meta’s revenue in its latest financial report.

The new ads option comes as frustration has built at Meta over the EU’s efforts to regulate tech companies. The company recently spearheaded an open letter saying that the bloc’s laws threatened to squelch the artificial-intelligence boom in the region.

A major source of tension has been whether and how Meta must ask users for consent to use the data it collects—not just for targeting ads but also for training AI. Meta delayed release of its AI chatbots in the EU after privacy regulators in the bloc had suggested the company may need to seek consent to train models based on adults’ public posts on Instagram and Facebook in Europe. 

Meta said Tuesday that it is introducing less-personalized ads to comply with demands from EU regulators—and that the changes could harm small businesses. “If EU regulation makes digital advertising less efficient, the entire European business community suffers,” Meta said. 

The new ad format is the second change in a year that Meta has made to its EU ads options. Last fall, it introduced an option called “subscription for no ads,” which forced users in Europe to choose between consenting to its highly targeted ads or buying a subscription to an ad-free version of Facebook or Instagram for a monthly fee starting at 13 euros, or nearly $14, a month on mobile devices.

The subscription offer was Meta’s effort to navigate both a new EU digital competition law and rulings by privacy regulators in the bloc, who said an earlier law also required Meta to seek user consent before repurposing information about user behavior to target ads. Concerned that too many users wouldn’t consent to targeted ads, undermining its business, Meta added a fee to cover at least some of the potential lost revenue. 

The company argued at the time that an EU court decision had suggested a fee was permissible. But in July, EU regulators charged Meta with violating the new digital competition law with what officials called Meta’s pay or consent model. Penalties for violations of the law can run as high as 10% of a company’s global annual revenue, or 20% in the case of repeated violations. 

The new less-personalized ads option is an effort by Meta to try to settle that case. As part of the new offer, Meta will also announce it is cutting the price of its subscriptions to €8 on mobile devices plus €5 for each additional mobile-device account. 

EU regulators have said they intend to finish their investigation by late March. Officials haven’t validated Meta’s approach, and discussions with the company haven’t concluded, according to some of the people briefed on the plans.

One question could be whether the new free option still relies in some ways on information about a user’s activity. Even if ads are selected to match only the content a user sees in a given browsing session, Meta’s apps personalize the content they show based on user behavior in prior sessions. That could make even those contextual ads indirectly based on a user’s past digital activity. 

Meta, for its part, says its new contextual ads “meet EU regulator demands and go beyond what’s required by EU law.”

A spokeswoman for the European Commission, the EU’s executive arm, said the investigation is ongoing and that the commission sent its preliminary findings in the case in July.

Write to Sam Schechner at Sam.Schechner@wsj.com and Kim Mackrael at kim.mackrael@wsj.com