Facebook, the core product of Meta Platforms, Inc. (NASDAQ: META), recently revealed that the company will adopt new online housing advertising practices after an investigation by federal officials.
Shares of the company declined almost 5.5% to close at $154.85 after yesterday’s trading session.
Details of the Investigation
The Justice Department and federal officials cited that Facebook used its ad-targeting tool called “Special Ad Audience” to find users who share similarities with groups of individuals selected by an advertiser using several options provided by Facebook. This resulted in the ads discriminating against users by race, gender, and other factors.
Further, officials believed that Facebook’s ad-delivery system used algorithms that rely on protected characteristics to help determine which subset of an advertiser’s targeted audience will actually receive the ad or not.
Now, with the new agreement with the federal officials, the company will cease usage of the tool by December 31 and develop a new tool for housing ads that will not be discriminatory.
Notably, the company will also pay a maximum civil fine of $115,054 under the Fair Housing Act, the federal officials said.
Management Commentary
Meta’s Vice President of Civil Rights, Roy Austin Jr. said “What we’re trying to do is make sure that no one can say that our systems are in any way treating people differently on the basis of protected characteristics.”
The company also stated that the new tool “strives to make additional progress toward a more equitable distribution of ads through our ad delivery process.”
Stock Rating
On June 21, Morgan Stanley analyst Brian Nowak reiterated a Buy rating on the stock with a price target of $300, which implies upside potential of 91% from current levels.
Consensus among analysts is a Strong Buy based on 28 Buys, seven Holds, and one Sell. The average Meta Platforms price target of $274.85 implies upside potential of 75% from current levels. Shares have declined 53.6% over the past year.
Website Traffic Trends
TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (SEMR), the world’s biggest website usage monitoring service, offers insight into Meta’s performance this quarter.
According to the tool, facebook.com recorded a 7.47% monthly rise in global visits in May, compared to April. Moreover, year-to-date, Meta website traffic increased 6.74%, compared to the previous year.
Consequently, the company’s rising website traffic has alluded to the fact that its growth prospects look strong.
Conclusion
Meta has been roiled with regulatory concerns as of late due to a myriad of reasons ranging from fake news, free speech, and now discriminatory ads. However, this settlement with the regulators can help the company in reducing discrimination on its platform while also developing a new and improved tool ensuring better housing ads for its users.
