Explainer

Meta blames Apple iPhone tracking pop up for $10 billion blow

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Are those targeted ads in your Facebook feed a little less creepy these days? You can thank Apple for that. It’s been a year since the iPhone maker introduced a pop-up requiring apps to ask its users if they consent to being tracked across the web.

With about 75% of users selecting “Ask App Not To Track,” Facebook and Instagram’s parent company Meta was hit with the economic equivalent of a nuclear missile. After reporting slowing earnings in February, the stock plunged 26% in one day, wiping out $251 billion in market value, the biggest decline in history.

“Facebook has talked about seeing a $10 billion hit to their ad revenue this year because of the Apple privacy changes,” said Mark Mahaney, head of the Internet Research Team at Evercore ISI. “Me thinks that that’s a little bit exaggerated, but there’s no question: It’s a big number out there.”

The seemingly harmless prompt that decimated the revenue of the world’s largest social network is called App Tracking Transparency.

“ATT is about returning control to its users, about giving them a say over how their data is handled,” Apple CEO Tim Cook said.

How tracking works

Each iPhone has a unique number called IDFA, identifier for advertisers. It helps advertisers identify you, see what you’re browsing and buying, and build a highly-detailed user profile on you and your online habits, all while concealing your personal information.

This feature brings you customized ads. Let’s say you downloaded a new shopping app and hovered over a couch for a bit, then closed the app. The app records your IDFA and because the company really wants to sell you that couch, it goes to Facebook asking to advertise to that specific IDFA. That’s how an ad for a sofa you glanced at in one app ended up on your Facebook feed.

“Somebody would see the ad and they could track that user, using personally identifiable information, they could track whether or not that person acted on that ad several websites later,” Mahaney explained.

That kind of cross-platform marketing feedback — whether the ad resulted in a sale — was invaluable to advertisers. Facebook’s ability to provide it lined its pockets with billions in profits.

Ask App Not To Track

If the iPhone user asks the app not to track, the IDFA doesn’t get shared and Facebook can’t attribute its ad to a sale, devaluing its advertising platform.

“It has a sizable impact on Facebook, and more on Facebook than anyone else, because Facebook was most effective at using that data in the past to target ads,” Mahaney said.

Meta is not the only corporation losing major revenue over ATT. Platforms like Snapchat, Twitter and YouTube are also adversely affected. But when it comes to targeted ads, these companies are down, not out. They are still tracking users on their own apps and people can still be targeted by aggregate data — the ads just won’t be as customized.

Fighting for “Allow”

In an effort get people to click allow instead of blocking tracking, companies are trying to sell users on the more personalized ad experience. Opt-in rates are growing from when the technology was first introduced in 2021, according to research firm Adjust. The study shows games also achieve higher opt-in rates.

SIMONE DEL ROSARIO: ARE THOSE TARGETED ADS IN YOUR FACEBOOK FEED A LITTLE LESS CREEPY THESE DAYS? YOU CAN THANK APPLE FOR THAT.

IT’S BEEN A YEAR SINCE THE I-PHONE MAKER INTRODUCED THIS POP UP – REQUIRING APP-MAKERS TO ASK ITS USERS IF THEY CONSENT TO BEING “TRACKED” ACROSS THE WORLD WIDE WEB.

ABOUT 75% ARE SAYING “NO THANKS, YOU’RE CREEPY” – AND TEN MONTHS LATER?

NEWS CLIP: Meta stock continuing to tumble this week after a disappointing report this quarter.

SIMONE DEL ROSARIO: THE COMPANY FORMERLY KNOWN AS FACEBOOK WAS HIT WITH THE ECONOMIC EQUIVALENT OF A NUCLEAR MISSILE.

HERE’S TECH ANALYST MARK MAHANEY.

MARK MAHANEY: Facebook has talked about seeing a $10 billion dollar hit to their ad revenue this year because of the apple privacy changes. Me thinks that that’s a little bit exaggerated, but there’s no question. It’s a big number out there.

SIMONE DEL ROSARIO: SO HOW DOES A SEEMINGLY HARMLESS PROMPT ON YOUR IPHONE DECIMATE THE REVENUE OF THE WORLD’S LARGEST SOCIAL NETWORK? 

APPLE CEO TIM COOK: ATT is about returning control to its users, about giving them a say over how their data is handled.

SIMONE DEL ROSARIO: IT’S CALLED APP TRACKING TRANSPARENCY – HERE’S HOW IT WORKS.

EACH IPHONE HAS A UNIQUE NUMBER CALLED I-D-F-A. IT HELPS ADVERTISERS IDENTIFY YOU, SEE WHAT YOU’RE BROWSING AND BUYING, AND BUILD A HIGHLY DETAILED USER PROFILE ON YOU AND YOUR ONLINE HABITS – ALL WHILE CONCEALING YOUR PERSONAL INFORMATION. 

AND THIS BRINGS YOU – CUSTOMIZED ADS.

SAY YOU DOWNLOADED A NEW SHOPPING APP AND HOVERED OVER THIS COUCH FOR A BIT. THE APP RECORDS YOUR IDFA AND REALLY WANTS TO SELL YOU THAT SOFA. AFTER YOU LEAVE THE APP, THAT COMPANY GOES TO FACEBOOK AND SAYS “LET ME ADVERTISE TO THAT USER.” AND THAT’S HOW AN AD FOR THE SOFA YOU GLANCED AT SHOWS UP IN YOUR FACEBOOK FEED. 

MARK MAHANEY: somebody would see the ad and they could track that user using personally identifiable information, they could track whether or not that person acted on that ad several websites later. 

SIMONE DEL ROSARIO: THAT KIND OF CROSS-PLATFORM MARKETING FEEDBACK – THAT IS WHETHER THE AD WORKED – IT WAS INVALUABLE TO ADVERTISERS – AND FACEBOOK’S ABILITY TO PROVIDE IT – LINED ITS POCKETS WITH BILLIONS IN PROFITS.

NOW, IF YOU’RE ASKING YOUR APPS NOT TO TRACK YOU, YOUR IDFA DOESN’T GET SHARED AND FACEBOOK CAN’T ATTRIBUTE ITS AD – TO A SALE. 

MARK MAHANEY: it has a sizable impact on Facebook and more on facebook than anyone else because Facebook was most effective at using that data in the past to target ads. 

SIMONE DEL ROSARIO: META’S NOT THE ONLY ONE LOSING MAJOR REVENUE OVER ATT NOW THAT IT CAN’T PROVE HOW WELL ITS ADS WORK. 

BUT WHEN IT COMES TO TARGETED ADS, THESE COMPANIES ARE DOWN – NOT OUT.

REMEMBER THEY’RE STILL TRACKING YOU ON THEIR OWN APPS – AND YOU CAN STILL BE TARGETED BY AGGREGATE DATA – THE ADS JUST WON’T BE AS CUSTOMIZED.

SO WOULD YOU CLICK ALLOW FOR A MORE PERSONALIZED AD EXPERIENCE? OR ARE YOU HAPPY FOR THE OPTION TO ASK APP NOT TO TRACK? 

LET’S GET THE CONVERSATION GOING IN THE COMMENTS.

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Are those targeted ads in your Facebook feed a little less creepy these days? You can thank Apple for that. It’s been a year since the iPhone maker introduced a pop-up requiring apps to ask its users if they consent to being tracked across the web.

With about 75% of users selecting “Ask App Not To Track,” Facebook and Instagram’s parent company Meta was hit with the economic equivalent of a nuclear missile. After reporting slowing earnings in February, the stock plunged 26% in one day, wiping out $251 billion in market value, the biggest decline in history.

“Facebook has talked about seeing a $10 billion hit to their ad revenue this year because of the Apple privacy changes,” said Mark Mahaney, head of the Internet Research Team at Evercore ISI. “Me thinks that that’s a little bit exaggerated, but there’s no question: It’s a big number out there.”

The seemingly harmless prompt that decimated the revenue of the world’s largest social network is called App Tracking Transparency.

“ATT is about returning control to its users, about giving them a say over how their data is handled,” Apple CEO Tim Cook said.

How tracking works

Each iPhone has a unique number called IDFA, identifier for advertisers. It helps advertisers identify you, see what you’re browsing and buying, and build a highly-detailed user profile on you and your online habits, all while concealing your personal information.

This feature brings you customized ads. Let’s say you downloaded a new shopping app and hovered over a couch for a bit, then closed the app. The app records your IDFA and because the company really wants to sell you that couch, it goes to Facebook asking to advertise to that specific IDFA. That’s how an ad for a sofa you glanced at in one app ended up on your Facebook feed.

“Somebody would see the ad and they could track that user, using personally identifiable information, they could track whether or not that person acted on that ad several websites later,” Mahaney explained.

That kind of cross-platform marketing feedback — whether the ad resulted in a sale — was invaluable to advertisers. Facebook’s ability to provide it lined its pockets with billions in profits.

Ask App Not To Track

If the iPhone user asks the app not to track, the IDFA doesn’t get shared and Facebook can’t attribute its ad to a sale, devaluing its advertising platform.

“It has a sizable impact on Facebook, and more on Facebook than anyone else, because Facebook was most effective at using that data in the past to target ads,” Mahaney said.

Meta is not the only corporation losing major revenue over ATT. Platforms like Snapchat, Twitter and YouTube are also adversely affected. But when it comes to targeted ads, these companies are down, not out. They are still tracking users on their own apps and people can still be targeted by aggregate data — the ads just won’t be as customized.

Fighting for “Allow”

In an effort get people to click allow instead of blocking tracking, companies are trying to sell users on the more personalized ad experience. Opt-in rates are growing from when the technology was first introduced in 2021, according to research firm Adjust. The study shows games also achieve higher opt-in rates.

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