Earlier in the year, when Meta released its second-quarter financial numbers, it had a ready justification for its first-ever drop in sales. The first factor, the global slowdown in ad spending, has also affected other digital giants, but the real problem has been the business impact of Apple’s privacy reforms, and Meta wasn’t afraid to say much.
In February, the Meta said that Apple’s AppTrackingTransparency feature would result in a loss of about $10 billion in advertising revenue in 2022 alone. This is competition from TikTok, lower ad spending in a downturn, iOS privacy changes and questions about Meta leadership, both with the departure of COO Sheryl Sandberg and negative PR around company policies,” says Raj Shah, head of communications, media and technology at Publicis Spent.
While some of the company’s more recent, well-discussed losses have been caused by its entry into the metaverse (or lack thereof), Apple’s tracking tweaks have anticipated those discussions in many ways. Users were asked if they wanted to share information when they first opened the app; Without this consent, the developer will not have access to IDFA, the device identifier used to target and evaluate the success of digital ads.
An estimated 62% of the one billion iOS users who have the option to choose not to have their location tracked by apps have done so as a result of the tweaks, which Apple claims were implemented in the interest of user privacy.
Facebook has become one of the largest digital advertising companies in the world because of this tracking technology, which digital advertising giants have used to create user targeting profiles for advertisers. It’s no surprise that the tweaks have caused so much anxiety among companies that are used to using those specialized tools, or that Facebook’s revenue has been hit so badly.
Meta has partially regained some ground lost as a result of revisions before the Q2 results are released. Through improved monitoring and analytics, it announced that the underreporting estimate had dropped from about 15% to about 8%. While the easing was good news for investors and advertisers, it also showed how long-lasting effects Apple’s reforms had on Meta.
Modifications Meta made to its feeds to emphasize high-yield ad formats, with a particular focus on short video, was further evidence of this. Although the company strongly objects to this, the company has also been accused of trying to circumvent the modifications by collecting information from websites that users have visited using its apps’ built-in browsers.
For the Meta, the difficulty stems from the fact that people are generally supportive of privacy and Apple has managed to convince them that its tweaks are for the better.
According to social media and technology analyst Matt Navarra, “The impact now, in terms of the relationship with Apple and other tech companies, is converging around this making it a challenging environment.” [for Meta]. And that’s something Apple has done very well to navigate and still come off as the good guy.”
As a result, Meta has made repeated attempts to resist Apple’s modifications, ranging from media appeals to legislative initiatives. Despite having some of the world’s most popular apps, the company alleged in a complaint filed with the US Department of Commerce that “the most popular mobile operating systems, such as Apple’s iOS, limit, and in some cases significantly limit, Meta’s ability to innovate in its products and services and even reach its customers.”Apple’s self-service tactics prevent consumers from realizing the innovation and benefits of a well-functioning and dynamic mobile app ecosystem.”
Her advertising skills are still being undermined, which is taking its toll on Meta. Although much of the coverage of third-quarter results earlier this month related to the massive losses incurred by its metaverse segment, as well as TikTok’s rampage and the loss of 11,000 jobs as a result, the underlying problems remain with Apple.
“Meta in 2022 is a far cry from Facebook a year ago,” said Debra Aho Williamson, Principal Analyst at Insider Intelligence. Its operations are in disarray in several areas, and the short-term outlook is not encouraging. We don’t expect the third quarter to be any better than the second quarter earnings announcement, which was very poor. It can get worse before it gets better.
Williamson further explained that “While many people want to point fingers at TikTok, it is not the main cause of Meta’s difficulties. Even if some advertisers shift their ad spend from Meta real estate to TikTok, that likely won’t be a significant amount of Meta’s total ad revenue.” Instead, the slowing economy and Apple’s privacy changes — affecting many digital platforms, not just Meta — are the main reasons for Meta’s challenges with revenue growth.”
Notably, Mark Zuckerberg mentioned two reasons when announcing the layoff. The first was his choice to expand investment levels in the company over the past five years, and the second was the reforms imposed by Apple.
The truth is that Apple’s privacy changes have shaken the Meta’s foundations, though the company may have found and still is looking for ways to mitigate the changes. While the company isn’t going anywhere in the near future, it has proven vulnerable, casting doubt on its previously unchallengeable status as an advertising giant.