Meta Platforms Inc (NASDAQ: META), the parent company of Facebook and Instagram, faced a significant uproar from two of its prominent corporate advertisers, Walmart Inc (NYSE: WMT) and Match Group Inc (NASDAQ: MTCH), due to their ad display next to content that sexualized underage users.
In an amended lawsuit filed on Tuesday, these advertisers expressed their concerns about the inappropriate placement of their ads on Meta's platforms.
Match Group, Tinder's parent company, informed Meta about a series of Reels that appeared alongside one of its ads, describing the content as "highly disturbing."
This included six consecutive videos featuring young girls in various provocative situations, the New York Post reports.
Match Group's concerns were so elevated that its CEO, Bernard Kim, reached out directly to Mark Zuckerberg, the CEO of Meta.
Walmart also voiced its concerns when one of its ads was seen next to "gruesome content" from a group titled "Only women are slaughtered."
Walmart demanded that Meta take immediate action to prevent such ad placements.
This dispute intensified following a Wall Street Journal report that Instagram's recommendation algorithms were boosting what the report referred to as a "vast pedophile network."
Meta attempted to reassure advertisers by stating that it removes 98% of violating content before it is reported.
Meta is already facing multiple legal challenges from state attorneys general over issues related to the impact of its platforms on underage users.
Meta faced child safety challenges on its platforms despite efforts, including establishing a task force in June.
Instagram's algorithms have been connecting accounts involved in underage sexual content creation and trading, with Meta's recommendation systems continuing to promote such content.
The problem extends to Facebook Groups, where large groups sexualize children, and Meta's algorithms often suggest similar groups.
Earlier, Meta initiated the implementation of encryption for Facebook direct messages, a decision that has sparked controversy within the company.
Despite initially announcing this encryption in 2019 as part of a privacy enhancement effort, Meta employees, including David Erb, raised concerns that it could impede the detection and reporting of child sexual abuse on the platform.
The stock gained 179% last year thanks to its artificial intelligence initiatives, beating the broader index Invesco QQQ Trust, Series 1 (NASDAQ: QQQ) at 47.2%.
Price Action: META shares are trading higher by 0.05% at $370.64 premarket on the last check Thursday.