Apple’s decision to change privacy settings on iPhones resulted in approximately $ 9.85 billion in revenue disappearing in the second half of this year from Snap, Facebook, Twitter and YouTube as their advertising activities were
shaken by the new rules.
Apple introduced its Application Tracking Transparency Policy in April, which required apps to ask permission before tracking user behavior to serve them personalized ads.
Most users have unsubscribed, leaving advertisers in the dark on how to target them.
Advertisers have responded by cutting spending on Snap, Facebook, Twitter and YouTube and diverting budgets elsewhere: particularly to Android phone users and to Apple’s growing advertising business.
Sheryl Sandberg, COO of Facebook, said the changes to the iPhone meant that “the accuracy of our ad targeting has decreased, which has increased the cost of results for our advertisers. And … measure these results became more difficult “.
Lotame, an advertising technology company whose clients include The Weather Company and McClatchy, estimated that the four technology platforms lost 12% of their revenue in the third and fourth quarters, or $ 9.85 billion.
Snapchat owner Snap recorded the worst percentage of business due to its focus on smartphones, while Facebook lost the most in absolute terms due to size.
Mike Woosley, COO of Lotame, said advertisers are now getting less for their money on iPhones. He gave as an example a men’s underwear brand that allegedly won a customer for a US $ 5 advertisement targeting 1,000 men.
“Well, now to have 1,000 men you have to show it to 2,000 people because all of a sudden you don’t know who’s a man and who’s a woman,” Woosley said. “And you still only have $ 5 for those 2,000 impressions. So your acquisition costs have doubled and the yield loss is 50%.”
Facebook has the most to lose in this scenario as the cost of serving ads on its platform has been rising for years, said Aidan Corbett, managing director of Wayflyer, which offers funding to online shopping start-ups.
“If your ability to advertise on Facebook is no longer economical, you’re going to walk away immediately,” he said. “So TikTok is becoming extremely popular because it’s a lot cheaper (starting at a cost per 1,000 impressions).”
Charles Manning, chief executive of Kochava, which measures the effectiveness of mobile marketing, said it was wrong to think that ad spend was actually going down. “Spending is not going down, it is just moving,” he said. “Where marketers spend money, this is where they see the results.”
Snap appears to have been caught off guard by the slow pace of Apple’s changes, which kicked off in late April but didn’t reach critical mass of users until mid-June.
Jeremi Gorman, chief commercial officer of Snap, said when the group announced its results on October 21 that while the “initial results” looked good, “over time,” she realized that the new system of metrics Apple advertising was “unreliable as a stand-alone measurement tool.”
The next day, Snap stock fell 27%, wiping out more than $ 30 billion from its market value. RBC analysts said the credibility of the company “has probably disappeared” and “management hardly could have looked worse for the effects this is having.”
Lotame’s estimates are likely to be conservative. Eric Seufert, an adtech consultant, said he estimated that Facebook alone could have suffered a shortfall of $ 8.3 billion in the two quarters. And he believes the lost revenue will carry over into the next few quarters as ad groups rebuild themselves using a privacy-centric paradigm.
“Some of the most impacted platforms – but especially Facebook – have to rebuild their machines from scratch as a result of ATT,” he said. “I think it takes at least a year to build a new infrastructure. New tools and frameworks need to be developed from scratch and thoroughly tested before being deployed to large numbers of users.”
David Wehner, chief financial officer of Facebook, called the effect of Apple’s policies “difficult” and “a little more disruptive than expected.”
In contrast, Alphabet and Twitter were much more isolated from the changes, each describing the success of Apple’s changes as “modest.”
For Twitter, ad sales increased 41% in the last quarter. The company said it was less affected by Apple’s policies, as its ads rely more on context and branding than tracking consumers’ mobile habits.
Alphabet has enough first-party user data that it does not need to track users through third-party applications. The exception is YouTube, but even there Ruth Porat, Alphabet’s chief financial officer, said the effect was limited.
Some analysts added that Alphabet would benefit from the switch from advertisers to Android phones. “When you lock the iPhone, it means marketers are going to spend more on Android,” Woosley said at Lotame.
Apple, meanwhile, on Thursday announced a “record” quarter for its advertising business, as its services segment topped revenue estimates by $ 700 million to reach $ 18.3 billion.
“Advertising is a growing business like everything else,” Luca Maestri, Apple’s chief financial officer, told the Financial Times. “We believe we have the opportunity to continue to grow over time.”
The windfall Apple has created has made it subject to allegations of hypocrisy. “None of this is altruistic,” said Cory Munchbach, chief operating officer at BlueConic, a customer data platform. “Apple did a great job turning privacy into a PR game, but they wouldn’t if there wasn’t the money in it.”
Asked about it by analysts last Thursday, Apple CEO Tim Cook said: “We strongly believe that privacy is a basic human right. And so that’s our motivation there. there is no other motivation. “
Written by Patrick McGee
© Financial Times