#SocialStocks: EU-U.S. Data Privacy Framework Sharing Pact Agreed Upon

Canadian companies halt ads with Meta amid news content squabble, Threads gains momentum and other notable stories from this week

Welcome to “#SocialStocks,” The Fly’s weekly recap of Wall Street’s reactions to social media stock news.

INTO THE METAVERSE: 

Roblox (RBLX) stated in a Developer Forum post: “We are excited to announce that Roblox is coming to Meta Quest (META), with an Open Beta on App Lab releasing in the coming weeks! Today, more than 66 million users join Roblox every day across a wide range of mobile devices (iOS and Android), desktops, and Xbox. Roblox, one of the largest 3D immersive platforms, will soon be available on Meta Quest, the leading VR headset. Roblox on Meta Quest is available for any user 13 and older. This opens up another opportunity for developers to create and share their experiences with millions of people instantly on Meta Quest. Roblox developers will be able to bring their existing experiences to Meta Quest or create unique new experiences with VR in mind.

“Cue your Meta Avatar. For the first time, we’re giving people using Messenger and Instagram access to real-time calling with Meta Avatars,” said Meta on Tuesday. Meta added, in part: “Whether you’re Instagram famous, a casual doomscroller, or an adventurer about to head off on some daring VR exploits, your Meta Avatar lets you represent yourself seamlessly and hang out with others across the metaverse. More than a billion Meta Avatars have been created to-date, helping people express themselves in digital spaces in new ways. And today, we’re sharing some updates that make your avatar more fun, useful, and social than ever before…We’ve all been there: A call comes in but your hair looks like a hot mess. Or you’ve just been bawling your eyes out while re-watching From Scratch for the umpteenth time (no judgment). Sometimes, we’re just not camera-ready. Wouldn’t it be great if there were a third option between camera-off and camera-on to let you feel a little more present on the call?”

BAN UPHELD: 

U.S. District Court Judge Terry Doughty denied a request by the U.S. government to delay an order he imposed last week banning federal agencies and officials from communicating with social media companies, reported Bloomberg. The Justice Department is expected to ask the 5th U.S. Circuit Court of Appeals to intervene after the federal judge in Louisiana refused to pause his July 4 nationwide injunction limiting the federal government from communicating with social-media companies.

Late last week the U.S. State Department canceled regular meetings with Meta about 2024 election prep, one day after a judge limited Biden officials’ contact with tech firms, The Washington Post reported.

DATA PRIVACY FRAMEWORK: 

The European Commission has adopted its adequacy decision for the EU-U.S. Data Privacy Framework. The decision concludes that the United States ensures an adequate level of protection – comparable to that of the European Union – for personal data transferred from the EU to US companies under the new framework. On the basis of the new adequacy decision, personal data can flow safely from the EU to US companies participating in the Framework, without having to put in place additional data protection safeguards. The EU-U.S. Data Privacy Framework introduces new binding safeguards to address all the concerns raised by the European Court of Justice, including limiting access to EU data by US intelligence services to what is necessary and proportionate, and establishing a Data Protection Review Court (DPRC), to which EU individuals will have access. The new framework introduces significant improvements compared to the mechanism that existed under the Privacy Shield. For example, if the DPRC finds that data was collected in violation of the new safeguards, it will be able to order the deletion of the data. The new safeguards in the area of government access to data will complement the obligations that US companies importing data from EU will have to subscribe to. President Ursula von der Leyen said: “The new EU-U.S. Data Privacy Framework will ensure safe data flows for Europeans and bring legal certainty to companies on both sides of the Atlantic. Following the agreement in principle I reached with President Biden last year, the US has implemented unprecedented commitments to establish the new framework. Today we take an important step to provide trust to citizens that their data is safe, to deepen our economic ties between the EU and the US, and at the same time to reaffirm our shared values. It shows that by working together, we can address the most complex issues.”

TWITTER COMPETITOR SHINES: 

Instagram’s Threads app has surpassed 100M users, reaching the milestone faster than even ChatGPT, The Verge’s Jay Peters and Jon Porter reported. Threads launched last Wednesday.

The chattering classes are abuzz about the launch of Threads, a new social-media platform from Meta Platforms, parent of Facebook, WhatsApp, and Instagram. Threads, which launched on Wednesday night, is a near carbon copy of Twitter, a place to post and discuss content and ideas, mostly in text form, Eric J. Savitz wrote in this week’s edition of Barron’s. Threads already has more than 30 million downloads, according to Meta CEO Mark Zuckerberg. Investors bid up Meta’s stock on the launch, suggesting they think Threads might crush Twitter. It just might, and yet the market is still overestimating Thread’s importance to Meta’s own business-and its stock, the author says. Meta has a habit of copying ideas created by rivals, the publication noted. Stories duplicates a feature first created on Snap ‘s (SNAP) Snapchat. Reels mimic TikTok. Now, Facebook is taking direct aim at Twitter, which has been struggling to regain its financial footing since Tesla’s (TSLA) Elon Musk paid $44B for the company in October.

Meta Platforms CEO Mark Zuckerberg posted an update las week that stated: “70 million sign ups on Threads as of this morning. Way beyond our expectations.”

Kinks in the app are still being worked out. In a post on Threads, Adam Mosseri, the head of Instagram, said: “I’ve been getting some questions about deleting your account. To clarify, you can deactivate your Threads account, which hides your Threads profile and content, you can set your profile to private, and you can delete individual threads posts – all without deleting your Instagram account. Threads is powered by Instagram, so right now it’s just one account, but we’re looking into a way to delete your Threads account separately.”

Threads is not without its detractors either.. Twitter (TWTR) is threatening to pursue legal action directed at Meta, accusing the company of hiring former Twitter workers for its ‘copycat’ app, according to Semafor. Twitter lawyer Alex Spiro, “sent a letter to Meta CEO Mark Zuckerberg accusing the company of engaging in ‘systematic, willful, and unlawful misappropriation’ of intellectual property, added the Semafor story.

CREATOR INCENTIVES: 

Snap’s efforts to lure creators and their followers back to its platform show early signs of traction, enticing popular internet personalities with a slice of the ad revenue their content generates, The Wall Street Journal’s Lindsey Choo and Meghan Bobrowsky wrote. The company behind the social-media app Snapchat-which previously lost creators after cutting a big payout program-started testing a new program last year that allows participants to earn a portion of revenue from the ads shown between their posts. The new revenue-sharing incentive, called the Snap Star program, opened up to all eligible users in April and has several thousand creators in it, the authors noted. The program is part of a broader effort to reverse Snap’s declining sales.

ADS HAULTED AMID FACEBOOK VS. CANADA NEWS: 

Wade Oosterman, Bell Media President, released the following statement: “As Meta continues with its plan to block Canadian news content from its digital platforms, we are immediately pausing our advertising on Facebook and Instagram. Like many Canadians, we are concerned about the consequences Meta’s decision to block links from Canadian news organizations will have on Canadians, and all those who reside or work here, all of whom should be able to rely on independent and trusted news from Canadian sources. The Online News Act will provide the necessary framework for fair negotiations for access to valuable news content with a Canadian perspective, which is critical for our democracy.”

Postmedia Network, a wholly owned subsidiary of Postmedia Network Canada Corp. (PCDAF), announced it has paused all direct company advertising on Meta platforms, including Facebook and Instagram, “adding to the wave of support for the Canadian news industry in the face of the unfair actions of dominant digital players.” Andrew MacLeod, President and CEO of Postmedia, said: “Our government recently made important steps by passing the Online News Act. There is no greater proof of the critical need for this law at this time than the actions taken upon its passing. We hope to work together to ensure that all parties can do what the Online News Act allows for, to bargain fairly, level the playing field and preserve journalism in Canada.”

ANALYST COMMENTARY: 

Goldman Sachs initiated coverage of Sprout Social (SPT). Sprout enhances customers’ ability to manage social footprints, analyze social data, and amplify social marketing, the firm told investors. Goldman believes Sprout’s significant technology investments, in addition to the platform’s single code-base and light implementation model, separates the company from peers and should drive meaningful share gains in the social media management software.

RBC Capital noted that the firm found ads on the Pinterest (PINS) mobile app that suggest the Amazon (AMZN) partnership is currently live, which the firm believes is “somewhat earlier than expected.” The integration and economics are unclear today, said RBC, which added that it expects the company will provide more details at its anticipated analyst day in September. RBC has a Sector Perform rating on Pinterest shares.

Deutsche Bank raised the firm’s price target on Meta Platforms. The firm thinks investors are increasingly optimistic on an improving digital advertising market at a time when Meta has meaningfully rationalized its cost structure and improved monetization at Reels and Messaging. Recent ad checks indicated ad spend has progressed nicely through the quarter and Facebook and Instagram have been positive relative to peers, Deutsche Bank told investors in a research note.

Citi reiterated the same rating on Meta after the company released Threads. The analyst is “impressed” with the ramping adoption of Threads given Instagram integration and envisions the product becoming a key part of Meta’s engagement strategy over time. Threads is most comparable to Twitter and fills a space in Meta’s product strategy for public conversations with a focus on a more “friendly” environment across topics, the analyst tells investors in a research note. Citi also believes Threads creates a generative artificial intelligence opportunity to further train Meta’s large language models.

Tigress Financial raised the firm’s price target on Meta Platforms. The firm said Meta “will further leverage its success” with Instagram and Reels with the recently announced introduction of the new integrated messaging app Threads. The launch is well-timed to take advantage of the recent vulnerability of Twitter, Tigress wrote to investors in a research note. The firm sees Threads, along with a “massive recovery” in digital advertising and ramp-up in artificial intelligence functionality across Meta’s platform creating a further upside catalyst for the shares.

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Originally Posted July 12, 2023 – #SocialStocks: EU-U.S. Data Privacy Framework sharing pact agreed upon