Press Inside Facebook’s $10 Billion Breakup With Advertisers.
Privacy features prompt e-commerce businesses to slash ad spending; ‘Apple has changed the game’
Facebook was long one of the surest bets in digital advertising. No longer.
Lots of other companies that depend on e-commerce sales, including makers of nutritional powders, eyebrow stencils and toilet sprays, are taking a look at their bottom lines and deciding the same thing. They are slashing their spending on Facebook and Instagram and sending their ad money to Google, Amazon.com Inc., Snap Inc. and other platforms, according to ad buyers and e-commerce companies.
The privacy change is hitting the heart of Meta’s business: its ability to target ads at users with precision and prove to marketers that the ads generate sales. Earlier this month, Meta said it expects a roughly $10 billion hit to sales this year as the result of the Apple change, which requires apps to ask users for permission to track their activity and share it.
Google this week unveiled its own proposal to curtail tracking of users across apps on Android devices, potentially exacerbating Meta’s challenges.
Meta has said that macroeconomic forces including inflation and supply-chain disruption also are putting pressure on ad spending. But the privacy push appears to be the biggest threat to the social-media giant’s once ironclad grip on ad spending by small online businesses and e-commerce companies.
Investor fears about the fallout from Apple’s change are one of the reasons that Meta’s market value has dropped by more than $300 billion since the recent earnings report.
Facebook has been trying to blunt the effects of the Apple changes, and some analysts are optimistic that Meta will contain the damage and that its business could begin to rebound in the second half of 2022.
Meta said in a written statement that it has more than 10 million advertisers. “Apple’s harmful policy is making it harder and more expensive for businesses of all sizes to reach their customers,” it said. “We believe Facebook and Instagram remain the best platforms for businesses to grow and connect with people, and we’ll always keep working to improve performance and measurement.”
Meta has been working to show advertisers that ads on Facebook and Instagram are driving more sales than its analytics show. And the company is developing new technology it hopes will give marketers nearly as much information about ad performance as they had before Apple’s changes.
Meta also has appealed to users to opt into device tracking. But data from app analytics provider Flurry shows that only 18% of U.S. users are choosing to do so across all apps. Meta has rolled out more e-commerce features within Facebook and Instagram so that more transactions happen within its own ecosystem.
Apple’s change could be the most disruptive innovation Meta ever faces, said analyst Daniel Newman of Futurum Research, which focuses on digital technology. “Facebook has built its empire on the ability to acquire intimate details about user behavior across the internet,” he said. “Apple has changed the game.”
Meta’s big investment in the metaverse is an attempt to create a future in which it is not beholden to other device-makers, some ad industry executives said.
Meta has been critical of Apple’s move, saying it would hurt not only its revenue, but also small-business advertisers and app makers, and that Apple has created a false trade-off between personalized services and privacy.
Inside Meta, some employees saw Apple’s change, and Google’s move in the same direction, as efforts to damage Meta’s business, according to a former employee of Meta’s ad-product division familiar with internal discussions. Advertising industry executives said marketers began to think more about moving money away from Facebook back in the summer of 2020, before Apple’s change. In the aftermath of the George Floyd murder, some brands temporarily boycotted Facebook over concerns about hate speech and faulty information on the platform. The ad executives said that was an inflection point for many companies who felt they had become too reliant on Facebook.
Women’s handbag brand Hammitt worked with Measured Inc., a company that uses statistical modeling to estimate how well Facebook ads are performing. The official rates reported by Facebook are abysmal, said Hammitt founder Tony Drockton, but Measured’s reports showed Hammitt’s Facebook ads are nearly as effective as they were before the privacy changes took effect.
As a result, Hammitt reduced its Facebook ad spending only slightly, from 50% of its total ad budget to 43%. Hammitt’s total dollars spent on Facebook actually increased because the company boosted its overall ad budget.
Facebook has said it has been undercounting how effectively its ads have worked for advertisers, and that it has recently made progress in solving the problem.
Privacy features prompt e-commerce businesses to slash ad spending; ‘Apple has changed the game’
Facebook was long one of the surest bets in digital advertising. No longer.
Lots of other companies that depend on e-commerce sales, including makers of nutritional powders, eyebrow stencils and toilet sprays, are taking a look at their bottom lines and deciding the same thing. They are slashing their spending on Facebook and Instagram and sending their ad money to Google, Amazon.com Inc., Snap Inc. and other platforms, according to ad buyers and e-commerce companies.
The privacy change is hitting the heart of Meta’s business: its ability to target ads at users with precision and prove to marketers that the ads generate sales. Earlier this month, Meta said it expects a roughly $10 billion hit to sales this year as the result of the Apple change, which requires apps to ask users for permission to track their activity and share it.
Google this week unveiled its own proposal to curtail tracking of users across apps on Android devices, potentially exacerbating Meta’s challenges.
Meta has said that macroeconomic forces including inflation and supply-chain disruption also are putting pressure on ad spending. But the privacy push appears to be the biggest threat to the social-media giant’s once ironclad grip on ad spending by small online businesses and e-commerce companies.
Investor fears about the fallout from Apple’s change are one of the reasons that Meta’s market value has dropped by more than $300 billion since the recent earnings report.
Facebook has been trying to blunt the effects of the Apple changes, and some analysts are optimistic that Meta will contain the damage and that its business could begin to rebound in the second half of 2022.
Meta said in a written statement that it has more than 10 million advertisers. “Apple’s harmful policy is making it harder and more expensive for businesses of all sizes to reach their customers,” it said. “We believe Facebook and Instagram remain the best platforms for businesses to grow and connect with people, and we’ll always keep working to improve performance and measurement.”
Meta has been working to show advertisers that ads on Facebook and Instagram are driving more sales than its analytics show. And the company is developing new technology it hopes will give marketers nearly as much information about ad performance as they had before Apple’s changes.
Meta also has appealed to users to opt into device tracking. But data from app analytics provider Flurry shows that only 18% of U.S. users are choosing to do so across all apps. Meta has rolled out more e-commerce features within Facebook and Instagram so that more transactions happen within its own ecosystem.
Apple’s change could be the most disruptive innovation Meta ever faces, said analyst Daniel Newman of Futurum Research, which focuses on digital technology. “Facebook has built its empire on the ability to acquire intimate details about user behavior across the internet,” he said. “Apple has changed the game.”
Meta’s big investment in the metaverse is an attempt to create a future in which it is not beholden to other device-makers, some ad industry executives said.
Meta has been critical of Apple’s move, saying it would hurt not only its revenue, but also small-business advertisers and app makers, and that Apple has created a false trade-off between personalized services and privacy.
Inside Meta, some employees saw Apple’s change, and Google’s move in the same direction, as efforts to damage Meta’s business, according to a former employee of Meta’s ad-product division familiar with internal discussions. Advertising industry executives said marketers began to think more about moving money away from Facebook back in the summer of 2020, before Apple’s change. In the aftermath of the George Floyd murder, some brands temporarily boycotted Facebook over concerns about hate speech and faulty information on the platform. The ad executives said that was an inflection point for many companies who felt they had become too reliant on Facebook.
Women’s handbag brand Hammitt worked with Measured Inc., a company that uses statistical modeling to estimate how well Facebook ads are performing. The official rates reported by Facebook are abysmal, said Hammitt founder Tony Drockton, but Measured’s reports showed Hammitt’s Facebook ads are nearly as effective as they were before the privacy changes took effect.
As a result, Hammitt reduced its Facebook ad spending only slightly, from 50% of its total ad budget to 43%. Hammitt’s total dollars spent on Facebook actually increased because the company boosted its overall ad budget.
Facebook has said it has been undercounting how effectively its ads have worked for advertisers, and that it has recently made progress in solving the problem.
Original Publisher
Wall Street Journal
Ready to see how trusted measurement can help your brand make smarter media decisions?
Press Apple’s Privacy Change Will Hit Facebook’s Core Ad Business. Here’s How.
New feature on iPhones will limit Facebook’s ability to collect data from apps and prove that ads work
Facebook Inc. FB -0.99% will suffer damage to its core business when Apple Inc. AAPL -0.69% implements new privacy changes, advertising industry experts say, as it becomes harder for the social-media company to gather user data and prove that ads on its platform work.
Facebook warned this week that Apple’s new feature, which is expected to roll out this quarter, will pose risks for its business, but the company hasn’t detailed how it is exposed. Facebook in August pointed to a small corner of its business that facilitates ad placements on third-party sites and apps. It has also played up how the change would hit small developers.
The core of Facebook’s business, its flagship app and Instagram, would be under pressure, too. The Apple change will require mobile apps to seek users’ permission before tracking their activity, restricting the flow of data Facebook gets from apps to help build profiles of its users. Those profiles allow Facebook’s advertisers to target their ads efficiently.
The change will also make it harder for advertisers to measure the return they get for the ads they run on Facebook—how many people see those ads on mobile phones and take actions such as installing an app, for example.
“The market dynamics here are going to shift heavily,” said Simon Poulton, vice president of digital intelligence at WPromote, a digital-marketing agency. “If you are marketing on Facebook and the results are going down because the efficiency is going down, you are going to turn that down.”
The chief executives of Facebook and Apple traded public barbs this week over the change. Facebook has aggressively pushed back against Apple’s plan. On an earnings call Wednesday, Facebook Chief Executive Mark Zuckerberg said, “Apple has every incentive to use their dominant platform position to interfere with how our apps and other apps work.”
Apple has defended its policy, saying it is giving priority to user privacy. An Apple spokesman declined to comment further. Without naming Facebook directly, Apple CEO Tim Cook condemned “conspiracy theories juiced by algorithms” and tied recent social unrest to an argument that app-tracking tools are turning consumers into advertising products.
The extent of the potential financial impact on Facebook, which generated $86 billion in revenue last year, isn’t clear. The company said it expects revenue to be stable in the next two quarters. In the past year, Facebook’s business has thrived despite the coronavirus pandemic and a boycott by several advertisers over hate speech on its platform.
Eric Seufert, an analyst and marketing strategy consultant who has studied Facebook’s business, said he expects the company to take a 7% revenue hit in the second quarter as marketers spend less and ad prices decline as a result of Apple’s change.
The fight is happening as Facebook and other tech giants are under antitrust scrutiny over their dominance. Companies looking to forestall action by regulators in such situations often argue they face substantial competitive threats in the marketplace.
“As we have said repeatedly, we believe Apple is behaving anticompetitively by using their control of the App Store to benefit their bottom line at the expense of app developers and small businesses,” said a Facebook spokesman.
Part of the power of Facebook’s business is how it gathers data from mobile apps—what people do on the apps, what they search for, what they buy and more. More than 85,000 iOS apps had installed Facebook code that relays data back to the company as of December, according to analytics firm MightySignal.
The data is often coupled with a unique Apple identifier for the app user—a string of numbers and letters that helps Facebook identify individuals, allowing it to add that data to their profiles, or “identity graph.” App data makes up about 15% of user profiles, WPromote’s Mr. Poulton estimates.
Apple’s planned privacy change will mean that apps can’t pass along that identifier without users’ permission, thereby limiting what Facebook can glean.
Ad buyers say Facebook’s insight into app usage is part of its value proposition. That data lets Facebook better optimize ads to the people most likely to become lucrative customers, saving advertisers money in the long run. For instance, a mobile game dependent on in-app purchases can target ads at users with a history of heavy in-game spending.
Many apps are dependent on highly targeted ads to drive downloads. Dating app Bumble Inc. cited the coming Apple change as a risk factor in its filings for an initial public offering and predicted that 20% or fewer of its users would opt to be tracked.
Apple’s restrictions will also strike at Facebook’s ability to show how well its advertising works. Facebook gives advertisers metrics such as how many people who viewed an ad in the past week went on to buy the advertised product. The company relies on Apple’s identifier to get this information on iOS mobile devices—which account for a significant portion of Facebook activity: Among U.S. smartphone users, 45.3% used iPhones in 2020, according to Statista.
Madan Bharadwaj, chief technology officer and co-founder of Measured, a marketing measurement company, estimates that Facebook will only be able to claim credit for about 50% of the sales it currently does, as a result of the change.
“It’s going to have a huge impact on the total amount of revenue, or conversions, that Facebook can attribute to itself, which is basically the signal that all advertisers use for making investment decisions,” he said. “It’s going to drop their performance metrics hugely.”
In August, when Facebook first warned of the coming Apple change, it pointed to Facebook Audience Network, a small part of its business that facilitates ad placements on websites and apps.
Apple’s move is part of a broader tightening of privacy rules in the digital advertising ecosystem, from government regulations in Europe and California to Google’s announced plans to get rid of third-party “cookies,” bits of code used to track users on desktop browsers.
In the fall, Facebook warned its partners that “upcoming digital privacy initiatives affecting multiple browsers will limit businesses’ ability to measure people’s interactions across domains and devices,” according to correspondence viewed by The Wall Street Journal.
The silver lining for Facebook, Mr. Poulton said, is that its competitors will also be hurt by the Apple change, particularly those in the business of serving automated, or “programmatic,” ads in real-time across the web. Marketers who want to shift spending away from Facebook may scan the landscape of options and say, “‘Facebook—it’s not as good as it once was, but it’s better than this,’” Mr. Poulton said.
It’s going to have a huge impact on the total amount of revenue, or conversions, that Facebook can attribute to itself, which is basically the signal that all advertisers use for making investment decisions.
New feature on iPhones will limit Facebook’s ability to collect data from apps and prove that ads work
Facebook Inc. FB -0.99% will suffer damage to its core business when Apple Inc. AAPL -0.69% implements new privacy changes, advertising industry experts say, as it becomes harder for the social-media company to gather user data and prove that ads on its platform work.
Facebook warned this week that Apple’s new feature, which is expected to roll out this quarter, will pose risks for its business, but the company hasn’t detailed how it is exposed. Facebook in August pointed to a small corner of its business that facilitates ad placements on third-party sites and apps. It has also played up how the change would hit small developers.
The core of Facebook’s business, its flagship app and Instagram, would be under pressure, too. The Apple change will require mobile apps to seek users’ permission before tracking their activity, restricting the flow of data Facebook gets from apps to help build profiles of its users. Those profiles allow Facebook’s advertisers to target their ads efficiently.
The change will also make it harder for advertisers to measure the return they get for the ads they run on Facebook—how many people see those ads on mobile phones and take actions such as installing an app, for example.
“The market dynamics here are going to shift heavily,” said Simon Poulton, vice president of digital intelligence at WPromote, a digital-marketing agency. “If you are marketing on Facebook and the results are going down because the efficiency is going down, you are going to turn that down.”
The chief executives of Facebook and Apple traded public barbs this week over the change. Facebook has aggressively pushed back against Apple’s plan. On an earnings call Wednesday, Facebook Chief Executive Mark Zuckerberg said, “Apple has every incentive to use their dominant platform position to interfere with how our apps and other apps work.”
Apple has defended its policy, saying it is giving priority to user privacy. An Apple spokesman declined to comment further. Without naming Facebook directly, Apple CEO Tim Cook condemned “conspiracy theories juiced by algorithms” and tied recent social unrest to an argument that app-tracking tools are turning consumers into advertising products.
The extent of the potential financial impact on Facebook, which generated $86 billion in revenue last year, isn’t clear. The company said it expects revenue to be stable in the next two quarters. In the past year, Facebook’s business has thrived despite the coronavirus pandemic and a boycott by several advertisers over hate speech on its platform.
Eric Seufert, an analyst and marketing strategy consultant who has studied Facebook’s business, said he expects the company to take a 7% revenue hit in the second quarter as marketers spend less and ad prices decline as a result of Apple’s change.
The fight is happening as Facebook and other tech giants are under antitrust scrutiny over their dominance. Companies looking to forestall action by regulators in such situations often argue they face substantial competitive threats in the marketplace.
“As we have said repeatedly, we believe Apple is behaving anticompetitively by using their control of the App Store to benefit their bottom line at the expense of app developers and small businesses,” said a Facebook spokesman.
Part of the power of Facebook’s business is how it gathers data from mobile apps—what people do on the apps, what they search for, what they buy and more. More than 85,000 iOS apps had installed Facebook code that relays data back to the company as of December, according to analytics firm MightySignal.
The data is often coupled with a unique Apple identifier for the app user—a string of numbers and letters that helps Facebook identify individuals, allowing it to add that data to their profiles, or “identity graph.” App data makes up about 15% of user profiles, WPromote’s Mr. Poulton estimates.
Apple’s planned privacy change will mean that apps can’t pass along that identifier without users’ permission, thereby limiting what Facebook can glean.
Ad buyers say Facebook’s insight into app usage is part of its value proposition. That data lets Facebook better optimize ads to the people most likely to become lucrative customers, saving advertisers money in the long run. For instance, a mobile game dependent on in-app purchases can target ads at users with a history of heavy in-game spending.
Many apps are dependent on highly targeted ads to drive downloads. Dating app Bumble Inc. cited the coming Apple change as a risk factor in its filings for an initial public offering and predicted that 20% or fewer of its users would opt to be tracked.
Apple’s restrictions will also strike at Facebook’s ability to show how well its advertising works. Facebook gives advertisers metrics such as how many people who viewed an ad in the past week went on to buy the advertised product. The company relies on Apple’s identifier to get this information on iOS mobile devices—which account for a significant portion of Facebook activity: Among U.S. smartphone users, 45.3% used iPhones in 2020, according to Statista.
Madan Bharadwaj, chief technology officer and co-founder of Measured, a marketing measurement company, estimates that Facebook will only be able to claim credit for about 50% of the sales it currently does, as a result of the change.
“It’s going to have a huge impact on the total amount of revenue, or conversions, that Facebook can attribute to itself, which is basically the signal that all advertisers use for making investment decisions,” he said. “It’s going to drop their performance metrics hugely.”
In August, when Facebook first warned of the coming Apple change, it pointed to Facebook Audience Network, a small part of its business that facilitates ad placements on websites and apps.
Apple’s move is part of a broader tightening of privacy rules in the digital advertising ecosystem, from government regulations in Europe and California to Google’s announced plans to get rid of third-party “cookies,” bits of code used to track users on desktop browsers.
In the fall, Facebook warned its partners that “upcoming digital privacy initiatives affecting multiple browsers will limit businesses’ ability to measure people’s interactions across domains and devices,” according to correspondence viewed by The Wall Street Journal.
The silver lining for Facebook, Mr. Poulton said, is that its competitors will also be hurt by the Apple change, particularly those in the business of serving automated, or “programmatic,” ads in real-time across the web. Marketers who want to shift spending away from Facebook may scan the landscape of options and say, “‘Facebook—it’s not as good as it once was, but it’s better than this,’” Mr. Poulton said.
Original Publisher
Wall Street Journal
It’s going to have a huge impact on the total amount of revenue, or conversions, that Facebook can attribute to itself, which is basically the signal that all advertisers use for making investment decisions.
Ready to see how trusted measurement can help your brand make smarter media decisions?