The social media giant is now shedding light on its privacy practices, but it has lost $10 billion in market value since the start of 2018. With a global ad spending of nearly $100 billion and more than 2.2 million advertisers currently running campaigns on Facebook, analysts say that the company’s current legal liabilities might be too much to bear for investors
Facebook is feeling a $10 billion sting from Apple’s privacy push. Facebook has been the target of criticism for its business model that relies on user data. Read more in detail here: apple privacy change.
The parent company of Facebook, FB -26.39 percent, provided a clear indication of how Apple Inc.’s AAPL -1.67 percent new ad-privacy policy is upsetting the digital-advertising market.
After Chief Financial Officer David Wehner said on Wednesday that the Apple policy will cost the company more than $10 billion in lost sales for 2022, equivalent to about 8% of its total revenue last year, Meta Platforms Inc. FB -26.39 percent closed down more than 26% in Thursday trading, a $230 billion+ loss in market capitalization.
On a conference call with analysts, Mr. Wehner added, “It’s a fairly severe headwind.”
The value of the stock dropped by the most in a single day in US history.
Snap Inc., a rival social media platform that fell more than 23% Thursday on fears about Apple’s policy’s effect on the online ad industry, reassured investors after the closing bell with its first-ever quarterly profit. The business also indicated that it had made headway in negotiating Apple’s policy adjustments. The stock soared more than 50% in after-hours trading as a consequence of the news.
Apple made the modifications in April, when it updated its iPhone software to require applications to ask users whether they wish to be monitored. The move hampered the capacity of applications to collect data needed to target digital adverts, forcing marketers to change their spending habits. Meta had previously said that Apple’s decision was affecting its ad revenue, but had not specified how much.
Meta was “seriously harmed,” according to Daniel Newman, a lead analyst at Futurum Research, and “it’s going to be a continual concern.”
The new iPhone 13s are on display at an Apple shop in Corte Madera, California; iPhone software requires apps to ask customers whether they want to be monitored.
Getty Images/Jonathan Sullivan
Investors were also concerned by Meta’s results, which included a loss of around a million daily users internationally in the previous quarter and a sales projection that fell short of Wall Street expectations for the current quarter. As it pursues Chief Executive Mark Zuckerberg’s bet on the metaverse, the online virtual world some regard as the next development of the internet, the corporation anticipates spending to rise by $20 billion or more this year.
Mr. Zuckerberg’s firm has benefited from rising digital ad expenditure. Before being renamed Meta last year, Facebook, FB -26.39 percent, had had years of solid income, thanks in large part to its ability to follow the activity of users of applications and websites and allow advertisers to provide highly targeted advertising based on that information. According to some estimates, the Apple policy change disturbed this ability, with a huge majority of users electing not to be monitored. According to Meta, legislation has made ad targeting and assessing the effect of placements more challenging.
Apple’s action has reverberated well beyond social media platforms. Zynga Inc., a videogame firm that specialized in smartphone games like Words With Friends and has its own advertising platform, took a blow from Apple’s new policy, which caused its stock to plummet last year. Last month, the firm was sold for $11 billion to Take-Two Interactive Software Inc.
Apple started forcing applications to acquire user tracking permissions in April. Now, both large corporations and small enterprises claim that the new privacy regulation is costing them money. Shelby Holliday of the Wall Street Journal discusses why such expenses might be passed on to consumers. Rafael Garcia’s illustration (video from 11/4/21)
While Apple’s policy definitely has an influence, Brian Wieser, GroupM’s head of business analytics, believes the impact on Meta may not be as significant as the company’s officials imply. He stated, “I’m doubtful that it’s as horrible as they’re portraying.” He claimed that the digital ad sector is thriving, citing Google parent Alphabet Inc.’s good profits this week, which seemed to be untouched by the policy adjustments.
Twitter Inc. indicated in its most recent earnings report in October that the Apple policy will have no impact on it since it isn’t as dependent on targeted digital advertisements as some of its competitors.
Because it relies on data that tracks players’ in-game behavior rather than information affected by changes in the iPhone software, Unity Software Inc., a provider of videogame development tools and advertising services, hasn’t been affected by Apple’s privacy rules, according to the company’s CEO, John Riccitiello.
Snap reported a net profit of $22.6 million in the most recent quarter, exceeding Wall Street projections after revenues increased 42 percent to $1.3 billion from the previous quarter. The company’s advertising division “began to recover from the effect of the iOS platform modifications faster than we expected,” according to Chief Financial Officer Derek Andersen.
Mr. Wehner, Meta’s CFO, said that Apple’s approach differs from Google’s, implying that the discrepancy may reflect a long-standing commercial connection between the two businesses. “We believe Google’s search ad business could have benefited relative to services like ours that are subject to a different set of Apple restrictions, and given that Apple continues to make billions of dollars from Google search ads, the incentive clearly exists for this policy discrepancy to persist.”
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Customers’ search keywords, rather than data obtained via app and site monitoring, are used by Google’s primary search-ad business to show what they are interested in.
A request for comment from Apple was not immediately returned. Google has refused to comment on the matter.
Google’s search and advertising income increased by 36% to $43 billion in the most recent quarter, owing to increased retail-related ad expenditure and YouTube advertising, which increased by 25% year over year. The business did not mention Apple, but previously said that the changes to user monitoring had a minor effect on YouTube income.
On Meta’s earnings conference on Wednesday, Sheryl Sandberg, the company’s chief operating officer, said the firm was working on methods to quantify the effectiveness of the advertisements it sells and to discover ways to offer relevant ads without gathering individualized data. “That will take some time.”
Snap, which has been exploring on innovative methods to serve advertisers, mirrored this attitude. Snap’s chief business officer, Jeremi Gorman, stated, “We are delighted with the early success.”
—This article was co-written by Sarah E. Needleman.
Meghan Bobrowsky can be reached at [email protected]
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Facebook has been feeling the sting of Apple’s privacy push. Facebook Marketplace, a service that allowed users to sell their unwanted items, was shut down by Apple after it found out that the app violated its terms and conditions. Reference: facebook marketplace.
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