\ This article totals 4270 words, expected to read 8 minutes /
"Allow 'XXApp' to track your activity on other apps and websites?"
On April 7, 2021, Apple released a new version of iOS 14.5, and this new privacy policy is causing a huge shock and reshuffle in the field of digital advertising.
Martha Krueger runs a gift company that used to spend all of her advertising budget on Meta's Facebook and Instagram, getting a new customer for every $14.
However, since April 2, 2021, her customer acquisition costs have increased 10 times. So, starting in October 2021, she shifted all of her advertising budget to Google.
Changes in privacy are impacting the core of Meta's business: it is able to deliver ads to users accurately and prove the effectiveness of ads to sales. Earlier this month, Meta said it expects sales to shrink by about $10 billion this year as a result of Apple's changes. Apple's new privacy policy requires apps to track activity only after they have user permission.
"It's kind of like the end of the era of Facebook's positioning capabilities." Krueger said.
After Apple's new privacy policy, there are several joys and sorrows, and Facebook advertisers are fleeing. People in the advertising industry see it as a turning point for many companies that feel they rely too much on Facebook.
For example, many e-commerce companies are observing the market and making the same decision. According to ad buyers and e-commerce companies, they are cutting back on spending on Facebook and Instagram and pouring their ad money into platforms like Google, Amazon, TikTok, Snap and others, who are following the trend and doing everything they can to attract advertisers.
However, although Google can undertake advertisers who "defected" from Facebook, due to the strong competition with Apple's App Store, the privacy ecology of google play has also become the target of public criticism, so it has also embarked on a long road of reform to ensure that the advertising machine continues to operate in the new privacy era.
Tens of billions of dollars adrift
In 2020, when Apple announced that it would carry out a comprehensive privacy reform for the iPhone, as one of the advertising giants of the mobile Internet ecology, Facebook's parent company Meta apparently felt unprecedented pressure to join forces with Twitter to publish a full-page advertisement to confront Apple for several days. Google, another Internet advertising giant, has hardly made any noise in public.
On February 3, Meta disclosed that its fiscal 2021 fourth-quarter financial results showed that adjusted net profit for the quarter was less than $10.3 billion, weaker than expected at $10.9 billion, down 8% year-on-year. Immediately after, Meta claimed that the dismal Christmas season results stemmed from Apple's privacy policy changes and said the new rules would reduce its 2022 revenue by $10 billion.
After the news broke, Meta's stock price plummeted, and the company's stock price has fallen by 37% since the news was announced. By comparison, shares of Google parent company Alphabet fell just 9 percent over the same period, in part as advertisers shifted some of their spending from Meta to Google's search ads.
Source: Unsplash
Alphabet has benefited, with many customers switching from the App Store to Android and investing advertisers in new platforms that can temporarily track users' online habits.
Google quickly unveiled its own privacy program, aimed at reducing user tracking of different apps on Android devices, which could exacerbate the challenges Meta faces. "Facebook has realized for some time that for users of its platforms, it needs to act according to the wishes of the app store platforms, and now these platforms are changing the rules, and there is little it can do about it."
Meta said macroeconomic factors such as inflation and supply chain disruptions are also putting pressure on ad spending. But privacy measures appear to pose the biggest threat to the social media giant's once tight grip on ad spending by small online businesses and e-commerce companies.
Investors are worried about the consequences of Apple's new privacy policy, so after the release of the new earnings report, Meta's market value fell by $300 billion. Facebook has been trying to play down the impact, with some analysts optimistic that Meta will take control and that its business could rebound in the second half of 2022.
Advertising business in the cracks
Meta said in a written statement that the company has more than 10 million advertisers. It claimed, "Apple's harmful policies make it harder for businesses of all sizes to reach customers and more costly." "We believe that Facebook and Instagram remain the best platforms for business growth and the best platforms for people to interact, and we will continue to work to improve performance and metrics."
Meta has been working hard to show advertisers that Facebook and Instagram ads are driving sales above the level that its analytics show, and is developing new technologies that it hopes will give marketers enough information about the effectiveness of their ads.
Meta also calls for users to choose device tracking. But according to app analytics provider Flurry, only 18 percent of U.S. users choose to do so across all apps. Meta has launched more e-commerce features on Facebook and Instagram so that more transactions happen in its own ecosystem.
Daniel Newman, an analyst at Futurum Research who focuses on digital technology marketing, said Apple's changes could be the most disruptive innovation Meta has ever faced. "Facebook's empire is built on the ability to obtain intimate details of what users are doing on the Internet." He said. "Apple changed the game."
Some advertising executives say Meta's big investment in metaverse is to repeat the mistakes of the past and avoid handing over its fate to hardware producers. Meta has been critical of Apple's move, saying it would hurt not only its revenue but also small advertisers and app developers, who made the wrong trade-off between personalization and privacy.
According to former employees of Meta's advertising products division, some employees believe that Apple's privacy policy and Google's actions are hurting Meta's business.
On Feb. 2, at Meta's earnings conference, Chief Financial Officer David Wehner slammed Apple and Google, arguing they had left their advertising businesses in trouble and suggesting that Apple's reforms would benefit Google. He noted that Google pays Apple billions of dollars a year to become the default search engine on the iPhone. Meta is positive about Google's proposal to limit tracking, which is not expected to take effect for at least two years.
Advertiser defecting from Meta
Brows by Bossy, a manufacturer of eyebrow templates, used to spend as much as $7,000 a day on Facebook ads. Amanda Siebert, co-founder of the e-commerce company, said that as the privacy policy changed, ad prices "began to rise, tracking was clearly no longer accurate, and performance declined." The company cut Facebook's spending by about 80 percent and shifted its budget to other platforms, including Amazon's search ads.
Ath Sport, a company that produces energy drinks for athletes, previously attracted a new customer for every $40 of ads on Facebook and Instagram. Owner Stuart Kam says that cost doubled in the summer of 2021. To that end, Ath Sport cut its ad spend on Facebook and started spending 60 percent of its total marketing budget on Google search ads, which was more effective. Still, they're spending more and more money on Google, where ad prices are also rising.
Advertising industry executives say marketers began thinking about moving money out of Facebook long before Apple made the change, according to advertising industry executives.
The companies they say are too dependent on Facebook and are now at a turning point.
"It's a learning for everyone to understand that things can be changed. You have to have a fallback plan, you have to diversify (serve ads). Kate Black, vice president of social strategy at advertising agency Horizon Next, said.
Apple's New Deal was a turning point. Black says most of her clients have already started shifting 10 to 15 percent of Facebook spending to other platforms like TikTok. Her clients are willing to "try and learn more and see what we can do on other social platforms." "In terms of reach and scale, Meta remains the biggest player in the space and will certainly continue to do so in the coming years, but other platforms are certainly growing as well." ”
Pourri, a toilet spray maker who has relied heavily on Meta to enable e-commerce sales during the pandemic, said in the second half of 2021 that its return on ad spend on Facebook began to decline as ad prices rose.
Suzy Batiz, founder and CEO of Pourri, said that while Facebook and Instagram still account for the majority of their ad spend, they are "looking for new ad channels." The company said it plans to shift about 30 percent of its advertising revenue from Meta to other platforms, such as TikTok and Amazon Search Ads. They spend close to $10 million a year.
Diana DiGuido, chief account officer at digital marketing agency Tinuiti, said Facebook's disclosure last quarter that its number of users declined for the first time had raised concerns among advertisers. Tinuiti works with consumer products and e-commerce companies. DiGuido says some of her clients want to test TikTok and Snap more forcefully to see if they can reduce their spending on Facebook without harming the business.
Apple's New Deal has affected almost the entire online advertising industry, but other companies have been less affected than they have. Nii Ahene, Tinuiti's chief strategy officer, said Snap relies less on network-wide data on precision advertising.
The olive branch of the competitor
Advertisers fled Meta, and its competitors saw an opportunity to compete for advertising revenue from it and accommodate these scattered advertisers.
Snap, Pinterest, and TikTok follow up in a timely manner, such as free credits when buying ads in the future. Advertisers say TikTok and Snap are trying to help brands repurpose Facebook ads so they can work better on their own platforms.
TikTok is cheaper than Facebook's ads, though the business may gradually push up its advertising costs as it grows, Tinuiti's Ahne said. Just as Apple's policy makes it harder for advertisers to measure the effectiveness of Facebook's ads on Apple's phones, Google's privacy practices could lead to the same consequences.
However, Google said it would issue substantial notices to the industry before ending the current system. The long timeline will give the advertising industry time to prepare.
Former Facebook employees say Meta is grappling with its unprecedented advertising crisis, but that's not without a solution. Meta, he says, could develop new advertising tools and find new ways to show good advertising performance to marketers. "Facebook knows the way it measures has to change."
Women's handbag brand Hammitt partnered with Measured, which used statistical models to evaluate Facebook ad performance. Hammitt founder Tony Drockton said facebook publishes a very poor percentage of official ads, but Measured's report shows hammitt ads on Facebook are almost as effective as they were before the privacy reforms went into effect.
As a result, Hammitt only slightly reduced Facebook's ad spend, from 50 percent of its total advertising budget to 43 percent. Hammitt's total spend on Facebook actually increased as the overall advertising budget increased.
Facebook has said it has been underestimating the impact of its ads on customers and says it has made recent progress in addressing the issue.
Facebook's long-term challenge is to improve its ability to deliver with precision. Analyst Michael Nathanson said it would be "going to take a few years" to rebuild target systems with less data. "Still, we are encouraged by the progress Facebook has made in monitoring and believe it will help them achieve their goals in the longer term."