Meta Platforms’ revenue is taking a multibillion-dollar hit this year because its social networks can’t gather as much data on iPhone users. The company spent last year attacking Apple for the change; now it’s publicly calling out Google, too.
The Facebook owner is alleging Google, which also sells personalised ads on iPhones, has an unfair advantage under Apple’s new policies. Apps including Facebook have to ask users if they consent to being tracked, but Google’s search results and browser don’t — causing some advertisers’ budgets to shift to Google for more effective targeting.
Meta only started critiquing other tech giants by name in recent years. The social media behemoth, now facing antitrust scrutiny around the world, stands to benefit from framing itself as an underdog, threatened by larger forces. Still, Meta told investors it expected to miss out on US$10-billion in ad revenue in 2022 because of Apple’s changes, making it clear the company is more severely impacted than others. Facebook had relied on data from other apps and websites to make its ads effective. Without it, advertisers need to spend more money to achieve the same results.
Facebook ads are “still important, just costing a heck of a lot more”, said Doug Zarkin, chief marketing officer of Pearle Vision, which relies on Facebook and Instagram to drive people to its eye-care website and stores. He estimated that campaigns are 15-30% more expensive than last year.
Last year, Google said it wouldn’t prompt consumers about data collection because, after Apple’s change, it decided not to use any of the data on iPhones that would require permission.
Google also doesn’t need the kind of data Facebook does from third parties in order to make its ads work. It runs its own mobile operating system, Android, and its own ad exchanges. When someone makes a search, their intention provides enough data to advertise to them effectively across Google-owned properties, which may incentivise marketers to move their ad budgets to Google as opposed to Facebook.
“Google just happens to be in the right place at the right time,” said Rick Watson, CEO of RMW Consulting. “They were the biggest recipient of the ad dollars that were shifted because of effectiveness.”
The lack of tracking data also means it has been difficult for Meta to prove that its ads are leading to sales, which makes them less valuable. Chief operating officer Sheryl Sandberg noted on Wednesday that this was an issue for Meta during the holiday quarter, saying Meta receives “less granular conversion data on a delayed basis”.
“This makes real-time decision making especially difficult,” she said. “That’s particularly important during the holiday period, where people are often spending a lot and really monitoring their ads and adjusting spend not even on a daily basis, but often on an hourly basis.”
Apple’s changes aren’t just affecting Facebook. People are giving the average app permission to track their behaviour just 27% of the time, according to Branch, a company that analyses mobile app growth and deep linking. Those numbers have stayed consistent for months since Apple first started pushing the the iOS update to users last year, says Alex Bauer, head of product marketing at Branch.
But Facebook relied on the data more heavily than others, including smaller social media peers, such as Snap and Pinterest. Both of those companies reported strong sales, downplaying Apple’s impact.
Snap said it has pushed advertisers on its Snapchat app towards Apple’s new measurement tools for tracking ad conversions. Pinterest chief financial officer Todd Morgenfeld said that Apple’s changes have not had a material impact on the company’s advertising yet, but that he still believes they could in the future. “We’re not immune to these issues impacting our business over time,” he said.
Meta’s criticisms of Apple and Google may bring more scrutiny from regulators, though it’s unclear whether that scrutiny will lead to any actual changes. Apple has become the primary target for attacks from Meta in recent years, as the social media company has criticised the iPhone maker’s privacy policies and its app store fees, saying they hurt small businesses.
Meta called out Google’s advantage during a disappointing earnings report last week that caused the company to shrink by $251-billion in market value in a single day. Google, which a day earlier had reported fourth quarter ad revenue that blew past expectations, was barely impacted by Apple’s changes.
“We believe Google’s search ads business could have benefited relative to services like ours that face a different set of restrictions from Apple,” Meta chief financial officer Dave Wehner said on Wednesday during the company’s earnings report. He implied Apple was being easier on Google intentionally because the search giant pays Apple to use Google as the default search product on iPhones. “Given that Apple continues to take billions of dollars a year from Google Search ads, the incentive clearly exists for this policy discrepancy to continue.”
Some of Google’s mobile ad sales and YouTube, its video giant, are affected by Apple’s bans, though Google hasn’t disclosed the exact damage. Google has set loose targeting restrictions on Android, its mobile software, and pushed back a ban on ad cookies for Chrome to 2023.
But search ads are Google’s primary business — one Apple seems to have carved out an exemption for, said Eric Seufert, an analyst at Mobile Dev Memo, a marketing industry publication. “It’s so blatant,” he said.
Apple’s new rules may shift advertising market share to any platform with direct data on what people purchase
Apple’s new rules may shift advertising market share to any platform with direct data on what people purchase, Brian Wieser, president of business intelligence at GroupM, said in an e-mail. That includes Amazon.com, the other tech giant trying to grow an advertising business.
Smaller rivals benefit, too, said David Spector, co-founder of the lingerie company ThirdLove. “Facebook does deliver you customers. It’s great for that. But at some point it becomes too expensive” he said. “You start to realise: Snapchat is pretty effective. Wow, TikTok is pretty effective.”
Apple and Meta are beginning to compete more directly on products like private messaging. Apple’s plans to build augmented and virtual reality headsets put the companies on a clear collision course. Meta’s Quest VR headsets have become a core part of the company’s plan to develop a a more immersive version of the Internet, known as the metaverse.
‘Nothing is certain’
Meta hopes to build more advanced technology that will enable targeted ads without the need to collect as much precise personal user data. This new system would rely on aggregated or anonymised data, but would likely require Web browsers to cooperate on a new type of cryptographic protocol so data could be shared securely. Meta believes this strategy will lead to a more privacy-safe way to run targeted advertising.
Since introducing its new privacy rules, Apple has benefited directly, too: ads that appear in App Store search grew 33%, according to Singular, a marketing analytics company.
“Facebook and Google have simply built the largest communities of people around their services virtually anywhere on the planet,” Singular said in its 8 February report. But “nothing about the future is certain, and past performance doesn’t guarantee future success”. — Kurt Wagner, Mark Bergen and Matt Townsend, (c) 2022 Bloomberg LP