For You, a lawsuit

School lunch is usually the time for students to catch up with friends and debate the mystery meet. But for one teen, it was more often spent scrolling through Instagram in a bathroom stall—with her later logging as many as 16 hours a day on the app. Years later, the young woman testified about her addictive algorithms in a Los Angeles courtroom, where a jury awarded her $6 million after finding Meta and YouTube liable for harming her mental health.

That verdict helped accelerate a costly legal reckoning for social media giants. According to a new Bloomberg investigation, major companies have quietly reached roughly a dozen confidential settlements with young plaintiffs in recent months, most ranging from $2 million to $2.5 million each.

• Meta: Agreed to pay two teens a combined $7 million in just the last two weeks.
• TikTok: Paid three teens $2.5 million each in August.
• YouTube: Paid two teens $2.25 million each in September after settling with another for just over $2 million in June.

The lawsuits allege that addictive features such as infinite scrolling, autoplay, and personalized feeds contribute to depression, anxiety, eating disorders, and other mental health problems. The companies deny wrongdoing and say they’ve invested heavily in protecting young users. Regardless, that has serious implications for their margins—and the future of where their profits come from.

The limits of unlimited scroll

Roughly 9,800 personal injury lawsuits are still pending against Meta, TikTok, Snap, and YouTube, along with cases brought by around 2,000 school districts. Bloomberg Intelligence estimates the industry’s collective theoretical liability could approach $400 billion (though actual payouts could be far lower).

But the lawsuits’ bigger threat may be to Big Tech’s business models. Social media companies make money by keeping users scrolling, then selling ads against that attention. Now, the very features that drive engagement are coming under fire:

• Meta agreed to limit users under 18 to two hours a day across Facebook and Instagram, with restrictions on nighttime access and notifications for the next decade, as part of a separate multibillion-dollar settlement with US states.
• California passed a law banning features such as personalized feeds, infinite scrolling, and autoplay for users under 16 starting in January. Meta, Google, and TikTok sued last week to block it.
• The EU is considering rules that would let even adult users disable features designed to keep them scrolling, potentially threatening engagement beyond the teenage demographic.

Profits take a hit

Those costs are already showing up in earnings. Meta took a $9.9 billion charge tied to its separate state settlement last quarter, helping push operating profit down 37% despite a 26% jump in revenue.

Snap, meanwhile, warned in its latest earnings report that legal scrutiny could hurt user growth and engagement. The “evolving legal and regulatory landscape” could “materially impact our business and financial results,” CFO Doug Hott said in a call with investors.

With more trials on the horizon, social media execs may get to live an experience akin to their own creation: doomscrolling through one lawsuit after another, with no end in sight. —SY