Earlier in the year, when Meta released its Q2 financial numbers, it had ready-made justifications for its first-ever decline in sales. The first factor, a global slowdown in ad spending, had also affected the other digital behemoths, but the real issue was the effect Apple’s privacy reforms had had on the business, and Meta wasn’t afraid to say as much.
In February, Meta stated that Apple’s AppTrackingTransparency feature would cause it to lose around $10 billion in advertising revenue in just 2022. “Five factors contribute to the decline. These are the competition from TikTok, reduced ad spend in a downturn, iOS privacy changes and questions about Meta leadership, both with COO Sheryl Sandberg’s departure and negative PR about corporate policies,” says Raj Shah, lead for telecom, media, and technology at Publicis Sapient.
While some of the company’s more recent and well-discussed losses were caused by its entrance into the metaverse (or lack thereof), the Apple tracking modifications in many ways predicted those discussions. Users were asked whether they wanted to share information when they first opened an app; without this consent, the developer is unable to access the IDFA, the device ID that is used to target and evaluate the success of digital adverts.
An estimated 62% of the billion iOS users who had the choice to choose to not have their location tracked by applications did so as a result of the modifications, which Apple claims were implemented in the interest of user privacy.
Facebook became one of the biggest digital advertising companies in the world because of this tracking technique, which was used by digital advertising giants to generate user-targeting profiles for advertisers. It comes as little surprise that the modifications generated major angst among businesses that were accustomed to using those specialized tools, or that Facebook’s revenue was severely impacted.
Meta has partially regained some of the ground lost as a result of the revisions prior to the release of its Q2 results. Through improved monitoring and analytics, it declared that the underreporting estimate had been reduced from about 15% to about 8%. Although the mitigation was good news for investors and advertisers, it also showed how long-lasting the effects of Apple’s reforms would be on Meta.
The modifications Meta made to its feeds to emphasize higher-yield ad formats, with a particular concentration on short-form video, served as further evidence of that. Although the firm vehemently disputes it, the company was also accused of attempting to get around the modifications by gathering information from websites users visited using the built-in browsers of its apps.
For Meta, the difficulty stems from the fact that people generally support privacy and Apple has succeeded in persuading them that its modifications are for the better.
According to social media and tech analyst, Matt Navarra, “the impact now, in terms of the relationship with Apple and other tech companies, is converging on this and that makes it a challenging environment [for Meta]. And that is something that Apple has done very well to navigate and still come out looking like the good guy.”
As a result, Meta has repeatedly made attempts to resist Apple’s modifications, ranging from media appeals to legislative initiatives. Despite having some of the most well-known apps in the world, the company claimed in a complaint it had filed with the US Department of Commerce that “the most well-liked mobile operating systems, such as Apple’s iOS, determine, and in some cases significantly limit, Meta’s ability to innovate on its products and services and even reach its customers. “Apple’s self-serving tactics prevent consumers from realizing the innovation and benefits of a dynamic and otherwise well-functioning mobile app ecosystem.”
Its advertising skills are still being undermined, which affects Meta. Even though much of the coverage of its Q3 results earlier this month was on the enormous losses incurred by its metaverse sector, as well as TikTok’s incursion and the 11,000 jobs lost as a result, the fundamental problems continue to be Apple-related.
Debra Aho Williamson, the principal analyst of Insider Intelligence, stated: “Meta in 2022 is a far cry from Facebook one year ago.” Its operations are in chaos in several areas, and the short-term outlook is not encouraging. We don’t anticipate Q3 to be any better than Q2’s earnings release, which was abysmally bad. It could very well get worse before it gets better.
Williamson further explained that “While many people want to point the finger at TikTok, it’s not the primary cause of Meta’s difficulties. Even if some advertisers are shifting their advertising spending from Meta’s properties to TikTok, this is probably not a sizable amount of Meta’s overall ad revenue. Instead, the sluggish economy and Apple’s privacy changes—which affect many digital platforms, not just Meta—are the main causes of Meta’s challenges with revenue growth.”
Notably, Mark Zuckerberg cited two causes when he announced the employee layoffs. The first was his choice to expand the company’s investment levels during the previous five years, and the second was the reforms that Apple imposed.
The truth is that Apple’s privacy changes have rocked Meta’s foundations, even though the business may have found and is still looking for ways to mitigate the changes. Although the corporation isn’t going anywhere for the near future, it has been shown to be weak, casting doubt on its once unchallengeable standing as an advertising titan.