- Meta said Apple’s recent privacy update has caused “headwinds” for its advertising business.
- Some meta insiders think Apple purposely targeted Facebook with the update.
- Apple’s own profitable advertising business is growing at a clip — and experts believe it could be tightening the privacy screw.
Apple CEO Tim Cook rarely publicly refers to Facebook or Meta by name — but it’s not hard to tell when he’s taking a thinly veiled swipe at his Silicon Valley counterpart Mark Zuckerberg.
In an interview with MSNBC in 2018, he said, “The truth is we could make a ton of money if we monetized our customer – if our customer was our product. We’ve decided not to do that.”
Asked how he would have handled Facebook’s Cambridge Analytica data-leak scandal differently: “I wouldn’t have been in this situation.”
same subject; Separate interview: “I think this fixed situation is so dire and has become so big that perhaps some well-crafted regulation is necessary.”
In a way, Apple took regulation into its own hands.
Apple’s App Tracking Transparency Update last year — which forced developers to ask permission before tracking users — sent shockwaves across the mobile advertising ecosystem.
Most users opt out of tracking, making it harder for advertisers to accurately target and measure the effectiveness of their ads.
Meta reported its first year-over-year decline in quarterly revenue on Wednesday. While executives on its earnings call largely focused the blame for it on macroeconomic changes, Meta CFO Dave Wehner also noted “Apple iOS challenges.”
Meta, whose explosive revenue growth over the years was intrinsically tied to its data-driven advertising business, has been hit hardest. An external estimate suggests ATT will wipe out $12.8 billion from Meta’s annual revenue this year.
Some meta insiders don’t consider this a coincidence.
“The sentiment inside Facebook — and what I’ve heard from other people in the industry — is that Apple has targeted Facebook a lot with these changes,” said a former senior Meta executive. “Initially it started out as a ‘privacy’-type PR moment, but then they saw it really caught on with consumers: easy wins to build their brand and hinder Facebook’s growth.”
As Meta’s ad business falters, Apple’s ad unit is breaking away from a much smaller base. Matthew Bailey, Principal Analyst at Omdia, estimates Apple’s search advertising business to grow 238% to $3.7 billion between 2020 and 2021. Bank of America global research analyst Vamsi Mohan predicted this month that Apple’s advertising business could bring in $20 billion in advertising revenue by 2026, up from an estimated $5.3. If it has expanded the service of ads within its App Store to its full suite of products and services.
“It’s absolutely a rocket ship — I think they’re thrilled,” said one former Apple employee, who talks with people still working on its advertising team. “The profit margin is completely off-earth.”
Spokesmen for Apple and Meta did not comment for this story.
Meta is racing to build new ad infrastructure – but it’s a work in progress
According to The Information, the idea for ATT was mooted at the top levels of Apple’s leadership team starting around 2019. According to the report, the plan was to explore a technical solution intended to crack down on companies using Apple’s identifier for advertisers to sell unintentional users’ profiles to data brokers.
Inside Meta, there had been informal discussion in the years before Apple’s ATT announcement that the future of the data signals it relied on for its advertising business was uncertain. However, a separate former Meta employee said, there was inertia to invest heavily in solutions to mitigate the impact of potential sanctions because platforms like Apple had not yet provided a roadmap for when a change would take place.
“You’re not going to take a huge swath of your expensive engineering resource to develop parallel, alternative solutions – and by definition, it will cost less than existing systems,” the ex-meta source said. “What if Apple or Google didn’t make any changes? You’d be left with a mothball option that was quickly becoming obsolete.”
App Tracking App displaying transparency indication. Apple When Apple dropped the ATT bomb at its Worldwide Developers Conference in June 2020, Meta assured investors and advertisers that it had the situation under control.
Meta CFO Dave Weiner said on the company’s earnings call that the impact on its own business would be “manageable” and that it was building targeting and measurement products to help advertisers work through the changes. In an interview that month, Zuckerberg said, “I think it’s possible that we’re in an even stronger position” after Apple rolled out the update.
Meta launched a crusade, saying it was on behalf of small businesses—including running ads in several national newspapers: “We stand for Apple for small businesses everywhere.”
“I don’t think this moment is really about privacy,” Steve Satterfield, Facebook’s director of privacy and public policy, told Insider in a December 2020 interview. Satterfield said the prompts from users asking for permission encouraged them to opt out, “which is going to push people and businesses toward business models that help Apple’s bottom line, which are business models that support subscriptions and businesses.” Rely on in-app payments.”
Cook dismisses suggestions that Apple targeted meta
Apple CEO Cook said in an interview with the New York Times last year that he was “not focused on Facebook” and that its privacy changes were “not aimed at any company, it’s aimed at a principle.” At the time of the “Stand Up to Apple” campaign, he tweeted that Meta can continue to track users as before, as long as iOS users give their permission., (As of May this year, only 25% of all app users were opting for tracking, according to mobile analytics firm Flurry.)
—Tim Cook (@tim_cook) December 17, 2020
Behind the scenes, Meta is rushing to build out new advertising infrastructure and has warned advertisers that disruption is to be expected as it has taken a call to revamp its advertising software with more privacy in mind. Started multiple attempts. But some ad buyers have said the Facebook ad platform has been small and unpredictable in recent months.
By February 2022, Meta said Apple’s new policy would result in a loss of $10 billion in advertising revenue.
To be sure, Meta isn’t the only company that has been challenged by Apple’s privacy changes. Snap and Google’s YouTube both cited ATT as a “headwind” in their most recent quarterly earnings. Competition has never been more intense in the advertising market with new entrants like TikTok, retail media and streaming-TV platforms all vying for marketers’ budgets. And like its rivals, Meta is currently facing an unstable macroeconomic environment and supply chain constraints that are causing some advertisers to halt their spending. At the same time, even companies like Google are facing tough comparisons with last year’s pandemic highs.
Experts say Apple could be giving meta more ad-related pain
Some advertising industry insiders and observers believe that Apple is still taking on Meta’s advertising business by tightening iOS privacy controls and investing more in building its own privacy-focused advertising business beyond search ads. can cause even more pain.
Analysts at Aret Research wrote in a June note, referring to the supply-side-platform, “we see Apple’s deliberate and over-the-counter policies around mobile advertising technology play a role in the role of mobile SSPs and ad networks.” ” Advertising technology that connects publishers with advertisers.
A Search tab ad in Apple’s App Store for MTV Play. insider screenshot
As an understanding of the actual, or perceived, impact of Apple’s privacy change becomes clearer, the ATT regulator may investigate. Antitrust watchdogs in Germany and Poland are already looking into whether Apple is “prioritizing itself” by implementing less restrictive tracking rules on its own apps and ad services. France’s competition authority last year decided not to implement “interim measures” to delay the rollout, as the feature found itself not competitive, but said it would continue to investigate.
In an apparent effort to get ahead of competition concerns, Apple recently funded and published a white paper by Columbia Business School professor Kinshuk Jerath, which made the “speculative” claim that billions of advertising dollars were spent by companies like Meta. had moved to Apple. ATT. The paper also concluded that Apple’s nascent search advertising business may have grown in the past year due to its launch in China and increased spending from finance and sports betting app developers.
Internally, there are signs that the ad unit is growing in importance. Insider reported in May that Todd Teresi, a longtime vice president in Apple’s advertising department, was quietly promoted at the start of the year and now reports directly to Eddie Q, senior vice president of the $76 billion services business.
Meanwhile, the company formerly known as Facebook is rearranging its business around the Metaverse concept — another area where Zuckerberg sees Apple as a competitor, The Verge reported. It is updating the design of its main apps to resemble TikTok’s scrolling video feed. At the same time, its executives have warned employees that the company plans to raise performance expectations and “transition” anyone who falls short. Meta employees fear job cuts and analysts are chilling on the stock.
“I think this whole thing was driven by this competitive motivation to hurt Facebook as a whole. That was the only, primary motivation,” said Eric Seifert, a mobile advertising consultant and founder of the MobdevMemo blog.
“Apple needs to control how users access content on their phones to maintain the premium they charge for hardware,” Seifert continued. “If Apple cannot authorize developers through the App Store rules, because all content is streamed outside the App Store and there is no actual downloadable app distributed through the App Store, then hardware could become a commodity.”