Meta dives 26pc as Apple’s advertising privacy policy hits sales

Facebook’s parent company Meta Platforms has served up a stark sign of how Apple’s new ad privacy policy is roiling the digital advertising world.

Mark Zuckerberg, CEO of Meta, speaks during a virtual Facebook Connect event last October. Picture: Bloomberg via Getty Images

Facebook’s parent company has served up a stark sign of how Apple’s new ad privacy policy is roiling the digital advertising world.

Meta Platforms closed down more than 26 per cent in Thursday trading – a $US230bn-plus ($322bn) loss in market capitalisation – after CFO David Wehner on Wednesday said the company expected the Apple policy to cost it more than $US10bn in lost sales for 2022, equivalent to about 8 per cent of its total revenue last year.

“It’s a pretty significant headwind,” Mr Wehner said on a call with analysts.

Apple introduced the changes last April, altering its iPhone software to require apps to ask users whether they want to be tracked. The move limited the ability to gather data through apps that are used to target digital ads and drove advertisers to alter spending patterns. Meta had said previously that the Apple move was hurting its ad business, but it hadn’t given an estimate of how much.

Meta “was impacted significantly and it’s going to be a continuous problem”, said Daniel Newman, an analyst at Futurum Research.

Meta raised other concerns for investors with its earnings, including the loss of about a million daily users globally in the last quarter, and its sales outlook for the current quarter fell short of Wall Street expectations.

The company expects expenses to jump around $US20bn or more this year as it pursues CEO Mark Zuckerberg’s bet on the metaverse, the online virtual world some see as the next evolution of the internet.

Booming digital ad spending has been a boon for Mr Zuckerberg’s company. Facebook, as the company was known before its renaming last year to Meta, enjoyed years of strong revenue driven in significant part by its ability to track the behaviour of users of apps and websites and enable advertisers to deliver highly targeted ads based on that information.

The Apple policy change disrupted that ability, with a large majority of users, according to some measurements, opting not to be tracked. Meta says that policy has made ad targeting more difficult and measuring the impact of placements harder.

Apple’s move has had reach beyond social media companies. Video game company Zynga, which specialises in smartphone games like Words With Friends and has its own advertising platform, suffered an earnings hit from the new Apple policy that led its shares to drop sharply last year. The company ended up selling itself to Take-Two Interactive Software for $US11bn last month.

While there clearly is an impact from Apple’s policy, Brian Wieser, GroupM’s president of business intelligence, said the impact on Meta might not be as great as the company’s executives have suggested.

“I’m sceptical that it’s as bad as they’re conveying,” he said. The digital ad business remains healthy, he said, pointing to Google parent Alphabet’s strong earnings this week, seemingly largely unaffected by the policy changes.

Twitter, in its most recent earnings report in October, said it expected to be largely unaffected by the Apple policy because it isn’t as reliant on targeted digital ads as some of its rivals.

Unity Software, a provider of video game development tools and advertising services, hadn’t been affected by Apple’s privacy rules because it relied on data that tracked players’ in-game behaviour as opposed to information affected by changes in the iPhone software, CEO John Riccitiello said in an interview.

Mr Wehner said Apple’s policy treated Google differently, suggesting the difference might reflect a longstanding business relationship between the two companies. “We believe Google’s search ad business could have benefited relative to services like ours that face a different set of restrictions from Apple and given that Apple continues to take billions of dollars a year from Google search ads, the incentive clearly sits for this policy discrepancy to continue.”

Google’s flagship search-ad business relies on search terms customers input to reveal what they are interested in, rather than on data collected from app and web tracking.

Google said its search and advertising revenue rose 36 per cent and topped $US43bn in the most recent quarter, led by strength in retail-related ad spending, with YouTube advertising up 25 per cent from the year-earlier period.

The Wall Street Journal