Meta warns of 'worse' experience for European users

Meta warned on Wednesday that European users could face a "materially worse" experience following a key regulatory decision by the European Commission.

Meta recently introduced a "consent or pay" model which leaves users to choose between paying for a monthly subscription or letting Meta combine data it has collected on Facebook and Instagram.

Last week, the European Commision - the EU's executive - announced it had decided that the model does not comply with the Digital Markets Act (DMA) and fined Meta €200m (£171m).

"Based on feedback from the EC in connection with the DMA, we expect we will need to make some modifications to our model," Meta said in its quarterly earnings statement.

Meta said it expected those modifications "could result in a materially worse user experience for European users and a significant impact" to its European business and revenue.

The company said those impacts could kick in as soon as the third quarter of this year, and may be in effect while it appeals the decision.

Eric Seufert, analyst at Mobile Dev Memo, said Meta may be trying to strategically turn European users into "vocal cheerleaders" for its products amid a regulatory clampdown.

"What they ultimately want to do is turn public opinion against this regulatory regime which will demonstrably degrade the product offerings that are available to EU residents," Seufert told the BBC in a phone interview after the announcement.

Meta, formerly known as Facebook, includes the social media network in addition to the photo sharing app Instagram and the messaging service WhatsApp.

The Commission has said that Meta's consent-or-pay model does not allow users to freely consent to how their data is used.

The body is currently assessing another option Meta introduced last year, which the company says uses less personal data to display advertisements.

Meta was given 60 days to comply with the DMA's recent decision, or risk further fines.

Apple was also issued a €500m (£428m) fine over its App Store practices last week.

Meta's announcement comes as it released quarterly earnings that beat Wall Street expectations.

The results showed Meta continues to bring in significant advertising revenue.

The company touted its AI tools on Wednesday.

"We're making good progress on AI glasses and Meta AI, which now has almost 1 billion monthly actives," Meta founder and CEO Mark Zuckerberg said in a statement.

"Our community continues to grow and our business is performing very well," he said.

Matt Britzman, senior equity analyst at Hargreaves Lansdown said the results showed that Meta has gone "full throttle on investments in AI" and notes

Britzman also noted the 6% jump in daily active users.

"There had been some concerns that we might see a slowdown in new users this year, but this was a very strong start and a signal to investors that Meta's family of apps has a grip on users that's hard to displace," Britzman said.

The EC fine comes amid what Meta called "an active regulatory landscape" in its earnings report.

The company is currently defending itself at trial in a case brought by the US Federal Trade Commission which alleges that Meta runs a social media monopoly.

The FTC, the top antitrust watchdog in the US, says Meta cemented its monopoly by purchasing Instagram in 2012 and WhatsApp in 2014.