Pomerantz Appointed Lead Counsel in Meta Platforms Securities Litigation
On June 6, 2022, U.S. District Judge Yvonne Gonzalez Rogers of the Northern District of California appointed Pomerantz LLP as Lead Counsel on behalf of the Lead Plaintiffs – Menora Mivtachim Insurance Ltd., Menora Mivtachim Pensions and Gemel Ltd., The Phoenix Insurance Company, Ltd., and The Phoenix Provident Pension Fund Ltd. – and the class, in Plumbers and Steamfitters Local 60 Pension Trust v. Meta Platforms, Inc., 22-cv-1470 (N.D. Cal.). This securities action alleges that Meta Platforms, Inc. ("Meta" or the "Company") misled the market regarding its mitigation efforts to counteract changes that Apple, Inc. (“Apple”) made to the iOS operating system that negatively impacted Meta’s advertising business model, and that Meta also failed to warn investors that it faced materially increasing competition from rival social media platform TikTok.
Meta (formerly known as Facebook, Inc.) operates Instagram, WhatsApp and Facebook, the largest online social network with registered users in excess of 3 billion worldwide. The Company’s profitability lies in third-party advertising on those platforms, and, in fact, its revenues are almost entirely generated from selling ads to businesses seeking the attention of Facebook and Instagram users.
Historically, a significant part of Meta’s ad sales were targeted toward users accessing the Company’s social media platforms via their iPhones. Meta’s success in this regard was enabled by the Company’s utilization of data about users obtained by tracking their other activities—i.e., by harvesting information gleaned from other, non-Meta sources on their users’ iPhones. Indeed, Meta readily admits that its “advertising revenue is dependent on targeting and measurement tools that incorporate data signals from user activity on websites and services that we do not control[.]”
In June 2020, Apple announced a host of privacy-oriented changes to the iOS operating software that runs iPhones, aimed at giving iPhone users more control over their own privacy and the data associated with their iPhone usage. Apple’s new privacy protections were a sea change to Meta’s advertising model, as they would essentially cut off Facebook and its sister services from almost all of the tracking and targeting abilities and information that they needed to sell targeted ads as they had done for years.
Allegations against Meta include that: (i) the iOS privacy changes had a material impact on Meta’s ability to provide the kind of targeted advertising that was a necessary function of its business model; (ii) as a result, customer ad spending significantly dropped; (iii) the Company’s so-called “mitigation efforts” were not properly implemented or were ineffective; (iv) Meta failed to curate a plan to properly address the impact of the iOS privacy changes; and (v) the Company failed to disclose known trends related to an exodus of Facebook and Instagram users to rival social media platform TikTok.
The truth emerged on February 2, 2022, when Meta released weak Q4 2021 financial results, including a $10 billion loss in revenue caused by the iOS privacy changes, and provided disappointing 2022 revenue guidance. The Company also attributed its weak results and guidance to slowing user growth due to competition from TikTok.
On this news, Meta’s share price fell $85.24 per share, or 26.4%, to close at $237.76 per share on February 3, 2022.