Meta says changes to Apple’s ad tracking policy will cost the company $10 billion in 2022, but does it have a plan to stop the bleeding?
If greater privacy controls for its users equals less revenue for Facebook parent company Meta Platforms (FB) – Get Meta Platforms Inc. Class A Report then the company may be in serious trouble.
Facebook expects changes to Apple’s (AAPL) – Get Apple Inc. Report privacy controls to cost the social media company $10 billion in 2022.
“Like others in our industry, we’ve faced headwinds as a result of Apple’s iOS changes,” Sheryl Sandberg, Meta’s chief operating officer admitted during Wednesday’s conference call.
While $10 billion may not sound like a huge amount for a company expected to generate $135 billion in revenue next year, numbers start to add up for a company who’s weak guidance is causing its stock to plummet Thursday.
Meta Platforms shares lost a quarter of their value Thursday following the company’s dismal fourth quarter release.
Facebook’s business model relies heavily on targeted advertising and greater privacy controls could spell disaster for the company that was once valued at over $1 trillion.
The ray of hope for those holding onto their Meta shares is that, based on the company’s comments during its quarterly earnings call, the Menlo Park-based company is well aware of the existential crisis privacy changes present.
But it isn’t clear yet what the company plans to do to fix the issue.
App Tracking Permissions Hurt Facebook’s Bottom Line
Apple introduced its App Tracking Transparency (ATT) framework for iOS 14.5 last year and is also included in iOS 15, which is running on 72% of the company’s modern iPhones.
The program issues a prompt asking users whether they want to be tracked when opening up an app. If the user clicks no, the app developer, in this case Meta Platforms, can no longer access the device’s Identifier for Advertisers (IDFA).
A survey of 5.4 million phones conducted by app analytics firm Flurry showed a worldwide daily opt-in rate of just 24% for apps that have displayed the prompt asking to allow for tracking. In the U.S. that number was 14%.
“Apple created two challenges for advertisers. One is that the accuracy of our ads targeting decreased, which increased the cost of driving outcomes. The other is that measuring those outcomes became more difficult,” Sandberg said.
Facebook Saw This Outcome Coming, Could Changes Be Coming?
“With Apple’s iOS changes and new regulation in Europe, there’s a clear trend where less data is available to deliver personalized ads,” CEO Mark Zuckerberg said Wednesday.
But Meta first acknowledged that Apple’s privacy setting changes were a problem during its third quarter earnings call in October when Sheryl Sandberg said that the company has “been open about the fact that there were headwinds coming.”
Sandberg also said the changes hurt the advertising industry “and advantaged Apple’s own advertising business.”
However, Meta believes that people still want to see relevant ads and as a result, the company named privacy as one of its top-two investment priorities in the coming years.
Regardless of its investments and plans for the future, Meta’s executives clearly still sees Apple’s policy changes as a game changer for itself.
“We think it’s a substantial — the substantial headwind to work our way through. And obviously, we’re working hard to mitigate those impacts and continue to make ads relevant and effective for users,” Dave Wehner, Meta’s CFO said on the call.
