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    One year on: how Apple’s privacy changes are still hurting Meta

    Facebook owner has found its status as an advertising giant more precarious than it could have imagined. As part of our Data & Privacy Deep Dive, we look at what it is doing to ameliorate effects of Apple’s updates.

    When Meta announced its Q2 financial results earlier in the year, it had ready-made excuses to explain away its first-ever revenue drop. Reason number one, a global slowdown in ad spend, had also hit the other tech giants, but the elephant in the room was the impact Apple’s privacy changes had had on the company’s ability to operate – and Meta wasn’t shy about saying so.

    The company announced in February that Apple’s AppTrackingTransparency feature would cost it in the region of $10bn in advertising revenue over the course of 2022 alone. At the time, Raj Shah, lead for telecom, media and technology at Publicis Sapient, said: “Five factors contribute to the decline. These are the competition from TikTok, reduced ad spend in a downturn, iOS privacy changes and questions about Meta leadership, both with COO Sheryl Sandberg’s departure and negative PR about corporate policies.”

    While the company’s foray into the metaverse (or lack thereof) has been responsible for some of its more recent and more talked-about losses, the Apple tracking changes have in many ways presaged those conversations. Upon opening an app, users were prompted to agree whether to share information; without that permission, the developer is forbidden from accessing the IDFA – the device ID used to target and measure the effectiveness of digital ads.

    The changes, which Apple argues are made in service of user privacy, gave a billion iOS users the option to opt-out of being tracked by apps, with an estimated 62% of them choosing to do so.

    That tracking tool was how digital advertising giants created user targeting profiles for advertisers and was the basis for how Facebook became one of the largest digital advertising companies in the world. It is small surprise that the changes caused huge consternation among brands that had been used to having access to those targeted tools, or that Facebook’s revenue suffered significantly as a result.

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    Making the best of it

    Prior to publication of its Q2 results, Meta had clawed back a little of the ground lost by the changes. It announced it had narrowed the underreporting estimate from around 15% to around 8% as a result of fine-tuning its measurement and analytics capabilities. That mitigation was welcome news for investors and advertisers, but it also demonstrated that the damage of Apple’s changes would haunt Meta for some time to come.

    That was further demonstrated by the changes Meta made to its feeds to prioritize higher-yield ad formats, with a particular focus on short-form video. The company was also accused of trying to circumvent the changes by collecting data from websites users visit using its apps’ built-in browsers, although the company strenuously denies that.

    For Meta, the challenge comes from the fact that users are broadly in favor of privacy and Apple has managed to communicate that its changes are in their best interests.

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    Matt Navarra is a social media and tech analyst. He says: “The impact now, in terms of the relationship with Apple and other tech companies, is converging on this and that makes it a challenging environment [for Meta]. And that is something that Apple has done very well to navigate and still come out looking like the good guy.”

    As a result, Meta has attempted to push back against Apple’s changes in a number of ways, from appeals in public-facing media to regulatory efforts. In May, the company announced it was filing a complaint with the US Department of Commerce, stating that: “Despite having some of the most popular apps in the world, Meta’s ability to innovate on its products and services and even reach its customers is determined, and in some cases significantly limited, by the most popular mobile operating systems, such as Apple’s iOS.

    “Apple’s self-serving tactics prevent consumers from realizing the innovation and benefits of a dynamic and otherwise well-functioning mobile app ecosystem.”

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    Sailing into the headwinds

    That undercutting of its advertising capabilities continues to impact Meta. While much of the coverage of its Q3 results earlier this month focused on the huge losses accrued by its metaverse division, as well as encroachment from TikTok and the 11,000 jobs lost as a result, the underlying issues remain Apple-related.

    Insider Intelligence’s principle analyst Debra Aho Williamson explained: “Meta in 2022 is a far cry from Facebook one year ago. Many aspects of its business are in disarray and its near-term prospects do not look promising. After a dismal earnings report in Q2, we aren’t expecting Q3 to be any better. It’s very possible it will be much worse.

    “Many people want to blame TikTok, but it’s not the main reason why Meta is having challenges. Even if some advertisers are moving ad budgets from Meta’s properties to TikTok, it’s likely not a very significant portion of Meta’s overall ad revenue. Instead, Meta’s revenue growth problems stem primarily from the weak economy and from Apple’s privacy changes, which are affecting many digital platforms, not just Meta.“

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    Notably, during the announcement of the job cuts, Mark Zuckerberg blamed two things. The first was his decision to increase the number of investments the company had made over the past few years, while the second was the changes enforced by Apple.

    While the company may have found and be seeking ways to ameliorate the changes, the reality is that Apple’s privacy changes have shaken Meta’s foundations. Its once insurmountable status as an advertising giant has been questioned and while the company isn’t going anywhere for the foreseeable future, it has been proven to be vulnerable.

    <p><strong>For more on how the world of data-driven advertising and marketing is evolving,&nbsp;<a href=”https://www.thedrum.com/topics/data-privacy-0″>check out our latest Deep Dive</a>.</strong></p>

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