In context: Last year, Apple announced new policies requiring app developers to post “privacy nutrition labels” in their App Store listings detailing their data collection practices. More importantly, the company revealed that it added a feature to iOS that would allow users to turn off ad tracking for individual apps.
Facebook has warned that Apple’s policies on Application Tracking Transparency (ATT) that give users control over how their data is collected would be a disaster for its developers and advertisers. He “conservatively” estimated a 50% drop in revenues from his Audience Network platform.
The Financial Times reports that Facebook, Snapchat, Twitter and YouTube lost $ 9.85 billion in the two quarters following full implementation of Apple’s ATT plans in April. While nearly $ 10 billion is a significant drop, it is nowhere near the 50% adpocalypse that Facebook was shouting about in full-page newspaper ads.
According to ad technology company Lotame, by virtue of its size, Facebook holds the vast majority of the ad revenue share, which has earned it the biggest financial blow. However, that was only a 13.2 percent drop. Snapchat also took a 13.2% hit and is a much smaller company, so it probably felt the effects even more. YouTube and Twitter saw smaller ad revenue declines of 7.7 and 7.4%, respectively.
Of course, the 12% median drop for these social media platforms doesn’t necessarily translate into an equivalent loss for the small businesses that advertise with them. Lotame COO Mike Woosley points out that, according to the company, individual advertisers can lose nearly 50 percent of their advertising power. He illustrates this with the example of a men’s underwear line buying a $ 5 ad aimed at 1,000 men.
“Well, now to have 1,000 men you have to show it to 2,000 people because all of a sudden you don’t know who is a man and who is a woman,” Woosley explained. “And you still only have $ 5 for those 2,000 impressions. So your acquisition costs have doubled and the yield loss is 50%.”
It should be noted that there is a difference between good value for money and lost income. Even still, Lotame’s estimates could tip to the conservative side. Adtech consultant Eric Seufert says Facebook alone could have lost $ 8.3 billion since April. He also says the losses are likely to continue as ad groups adjust to a new “privacy-centric paradigm.”
“Some of the worst affected platforms, but especially Facebook, have to rebuild their machine from scratch as a result of ATT,” Seufert said. “I think it takes at least a year to build a new infrastructure. New tools and frameworks need to be developed from scratch and thoroughly tested before being deployed to large numbers of users.”
In the meantime, many companies are finding that Facebook is no longer a viable advertising platform due to its ever increasing costs and now reduced advertising power. Wayflyer CEO Aidan Corbett said many advertisers have switched to TikTok because the cost per 1,000 impressions is much lower.
This change in advertising budgets is the reason why these large platforms are experiencing declines. It’s not that companies have cut ad spending. They simply moved it from underperforming places to more efficient places. It is therefore difficult to determine the extent to which individual advertisers have been affected overall.
Twitter and Google said the effects of Apple’s ATT policies were minimal. Twitter says its ad sales increased about 41% in the last quarter. The company says its advertising platform relies less on tracking users’ mobile habits and more on “context and branding.” Alphabet says it has enough first-party data that it doesn’t need to track users through third-party apps. The exception would be YouTube, but Google claims that even the effects of ATT on YouTube were “modest”.
Unsurprisingly, Apple has performed well since implementing its transparency policies. Last month, the App Store’s Search Ads platform tripled its growth compared to last year. While it once held just 17 percent of the iPhone’s advertising market share, it now stands at 58 percent. Of course, a significant portion of this growth reflects the atrophy of the market as advertisers shift more funds to other platforms.