Snap, Facebook, Twitter and YouTube have lost an estimated $9.85 billion in revenue due to Apple’s App Tracking Transparency feature, according to a Financial Times report.
The four largest technology companies are expected to see a 12 percent decline in revenue on average in the third and fourth quarter of 2021, according to research advertising technology firm Lotame. Businesses like Snap, whose entire business model revolves around smartphones, and Facebook, whose revenue is derived from targeted ads at nearly 98 percent, were particularly hard hit.
But some experts consider Lotame’s estimates conservative. Eric Seufert, a consultant with Adtech, said that Facebook alone could have lost $8.3 billion in revenue. Advertisers’ shift to business models that consider user privacy measures will almost certainly exacerbate the company’s problems.
“Some of the platforms that were most impacted—but especially Facebook—have to rebuild their machinery from scratch as a result of ATT,” he told the Financial Times. “My belief is that it takes at least one year to build new infrastructure. New tools and frameworks need to be developed from scratch and tested extensively before being deployed to a high number of users.”
According to the Financial Times, Apple’s ad revenue topped $18.3 billion in the third quarter, beating expectations by $700 million.
Under the new transparency feature, users must give their consent for apps to track their online activities in order to deliver personalized advertising in iOS 14.5. However, a problem allows some shady app developers have found workarounds for tracking users—an issue that Apple has been slow to address.
Until now, the majority of users have declined permissions. Only 4 percent of U.S. iPhone users agreed to let apps track them after updating their devices in the weeks immediately following the launch of the feature. Many advertisers have decided to invest their money elsewhere and slash spending on platforms like Snapchat, Facebook, Twitter, and YouTube because of a lack of user data on iOS, according to the Financial Times.
While the total amount of ad spending hasn’t changed much over the past few years, social media companies have seen their share of the pie steadily shrink.
The CEO of Kochava, Charles Manning, tells the Financial Times that “spending isn’t decreasing, it is just moving” in an interview. “Marketers see results where they put their money.”
Social media companies are still reeling from the fallout from the Cambridge Analytica scandal. Sheryl Sandberg, Facebook’s COO, outlined a number of challenges caused by Apple’s new policy in Facebook’s third-quarter earnings report.
In the second quarter, she said, “we started to see that impact, but consumer adoption ramped up by late June, so it reached critical mass in Q3.” Consequently, we’ve encountered two difficulties. There are a number of reasons for this, including a decrease in the accuracy of our ad targeting. The second is that it became more difficult to measure the results.”
However, despite these losses, Facebook (now known as Meta) is unlikely to suffer greatly because of the company’s wide range of platforms and investments. When it comes to Snap’s luck, things may not be so good. When Apple reported third-quarter earnings that were less-than-impressive, the company’s stock plummeted by about 25 percent.
On iOS, Snap had to deal with “industry changes that impacted our business in a more significant way than we had anticipated,” chief business officer Jeremi Gorman said in a prepared statement to CNN. This is an issue that tech companies around the world continue to struggle with, especially as the holiday season nears, and Snap is no exception.
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