Last week, Apple released iOS 14.5, and with it a new feature that sent online advertisers scrambling: For the first time, users can tell apps not to track their activity across different sites and services. In an attempt to dissuade them from doing so, the Facebook and Instagram iOS apps are admonishing users that tracking helps keep those platforms “free of charge.”
This is technically true; Facebook is an advertising company that profits from showing ads that its users are more likely to click. But the iOS 14.5 notice also frames the issue in a way that implies Facebook can’t make money if it foregoes this kind of tracking, or worse, that Apple’s App Tracking Transparency update may force the social network to start charging its users a fee. So it’s worth being absolutely clear: Neither of those is the case.
It’s not that Apple’s anti-tracking measures won’t take a bite out of Facebook’s profits. The proof is in the pushback; the platform has mounted a sustained campaign against the measures, including a series of full-page ads in major newspapers in December. (Facebook isn’t alone here; advertising companies and their adjuncts have broadly decried the update, and a marketing coalition in Germany has filed an antitrust complaint against Apple.)
“There are some types of ads, mostly retargeting, that will be harder to display, since now Facebook wouldn’t know who visited an app, put an item in the shopping cart, etc.,” says Ron Berman, a marketing professor at University of Pennsylvania’s Wharton School. He notes that Facebook will also have a harder time demonstrating that product sales were tied to specific ads, given the limitations on what information can now flow across sites and apps.
But you need not look much further than Facebook’s most recent quarterly earnings report, released last week, to see that iOS 14.5 seems unlikely to push the company toward any kind of precipice. The company took in over $26 billion of revenue in the first three months of 2021, and its net income of $9.5 billion nearly doubled that of the same period a year ago. It has over $64 billion of cash and equivalents on hand. It’s doing just fine. Even if every single iOS 14.5 user opts out of tracking, Facebook will still have Android devices aplenty from which to squeeze profits.
It’s also not as if tracking prevention makes ads go away entirely. It arguably makes them less relevant. People may not click on them as often, which makes them less valuable, and outside analysts have predicted that Apple’s new policy will show up in Facebook’s bottom line. “We’ve seen estimates ranging from about a 2 percent to a 7 percent impairment of Facebook’s ad revenues this year and that range seems plausible to us, especially at the low end,” says Nicole Perrin, a principal analyst at eMarketer. However, she adds, the company is expected to increase its ad revenue overall despite App Tracking Transparency. As WIRED’s Gilad Edelman has noted before, when third-party data disappears, companies that hold more first-party data have an edge. That’s Google, and that’s Facebook.
Facebook has mounted a sustained campaign against Apple’s new privacy measures, including its in-app messages.
Courtesy of FacebookSource:WIRED
