Apple’s privacy push: Understanding its deep impact on Meta, other platforms

Apple’s privacy feature rolled out last year for iPhone users giving them the choice to stop apps from tracking them is making its presence felt.

Users are opting out with finally a tool that allows them to choose whether to be tracked or not. The feature is particularly hurting platforms such as Meta, which have built revenue streams from large advertising businesses.

The outlook particularly for Meta seems to be bleak, according to the company. There has been an estimated $10 billion hit in advertising revenues in 2022 as iPhone users are getting the choice to opt out of being tracked. That prevents the company from collecting data it can share with advertisers to send out personalised ads. Markets have reacted sharply, and the impact has also been felt by other social media platforms including Twitter and Snap.

The latest earnings numbers and Meta’s ad revenues in 2021 are indicating an upward trajectory. It is the “other revenue” that is declining fast. Also, for the first time in the company’s 18-year history, daily active users have declined. Rival platforms such as TikTok and Snap are acquiring more users than ever before, which further hurts Facebook and Instagram, two of Meta’s most important social media apps.

Setting the cat among the pigeons

Apple’s App Tracking Transparency (ATT) feature was rolled out for iPhone users in April 2021 as part of the iOS 14.5 update. It works for any app installed on iPhone. Users get a prompt with the question asking them to allow a specific app to track activity across other companies’ apps and websites. Users have the choice to either “Ask App not to Track” or “Allow”.

Any app on the phone seeking to track usage and collect data about a user is searching for browsing or reading will need permission. A user can choose to allow or deny. This effectively ended the free run that apps and web platforms had of collecting data without permission and serving targeted advertising at least for iPhone users.

The choice between privacy and personalisation

The latest earnings numbers for Meta, which now have a new structure divided between revenue from Family of Apps (FOA including Instagram, Messenger, and WhatsApp), and Reality labs. Within this, there is advertising revenue and other revenue.

Meta posted revenue of $33.67 billion in Q4 2021, which is up 20% from the same quarter in 2020 ($28.07 billion). The revenue for 2021 was $117.92 billion, which is 37% higher compared with 2020 ($85.96 billion). Within this, the advertising-specific revenue for the year was $114.93 billion, up from $84.16 billion in 2020.

The quarterly trajectory for advertising revenue in 2021 shows an overall upward trend, except for one period of plateauing out. For the quarter ending March, Meta’s ad revenues were $25.43 billion. In April, Apple’s ATT privacy feature was rolled out for iPhone users. The quarter ending June had Meta post advertising revenue of $28.58 billion. The quarter ending September was a struggle, with ad revenues of $28,27 billion. For the quarter ending December, the revenue from ads again increased to $32.63 billion.

Ad impressions, as well as average ad prices, have increased. “In the fourth quarter of 2021, ad impressions delivered across our Family of Apps increased by 13% year-over-year, and the average price per ad increased by 6% year-over-year,” said Meta in the earnings report. “For the full year 2021, ad impressions increased by 10% year-over-year, and the average price per ad increased by 24% year-over-year.”

Also Read | Snap is about more immersive, personalised experiences: Murphy

The worry for Meta is the personalisation of adverts and the data needed for that to happen. Meta has confirmed it is rebuilding ads infrastructure to work around the challenges. “With Apple’s iOS changes and new regulation in Europe, there is a clear trend where less data is available to deliver personalised ads. But people still want to see relevant ads, and businesses still want to reach the right customers,” said Mark Zuckerberg, CEO, in the earnings call.

The changes will include new tools that will give advertisers better insights in the face of lack of tracked data for serving ads.

Users turning away?

In the December quarter, Meta said Facebook had 1.928 billion daily active users on average, and 2.91 billion monthly active users. The quarter ending September pegged the daily and monthly active users at 1.93 billion and 2.91 billion. This means Facebook’s appeal has not grown. The company has seen its daily active users drop for the first time in its 18-year history.

Things become a bit more complicated for the active user base for the family of apps. Meta said that ending December, the family of apps had 2.82 billion daily active users and 3.59 monthly active users.

In the earnings call, Dave Wehner, chief financial officer at Meta, said user growth in India has been limited due to an increase in data package pricing.

At the beginning of December, Airtel, Reliance Jio, and Vi announced new prices for prepaid data packs—up as much as 25%. The entry plan is now priced around ₹99 instead of ₹79 with the same 28 days validity.

Market reaction

“We believe the impact of iOS overall as a headwind on our business in 2022 is on the order of $10 billion,” said Wehner.

Meta’s market value plunged by $230 million in a single day, the trading day after the earnings call, the highest ever one-day loss for a company listed in the US. Its market cap is $661.39 billion, and it has slipped behind Berkshire Hathaway to slot 7 on the list of largest companies in the US by market capitalisation. That is a 26.39% decline, according to data by CompaniesMarketCap.

Other social media platforms are also face negative sentiment. Twitter’s single-day change in market value was negative 5.56% and is now valued at $27.57 billion. Snap faced a decline of 23.60% in a single day and is now valued at $39.33 billion. Meta was valued at $921.75 billion at the end of April 2021. Snap was rated at $94.18 billion while Twitter had a market value of $44.1 billion. Apple leads with a market value of $2.82 trillion, followed by Microsoft ($2.25 trillion), Alphabet ($1.89 trillion), Amazon ($1.40 trillion), and Tesla ($894.93 billion). Berkshire Hathaway and Meta follow.

Rival platforms, the big threat

Snap reported $1.3 billion in revenue for Q4 2021, which is a 42% increase over the same quarter the year before. For 2021, Snap said the revenue increased as much as 64% to $4.1 billion, compared with the year before. Snapchat app’s daily active users for the quarter clocked at 319 million. This was an increase of 54 million (about 20%) compared with the same quarter the year before. The full-year growth for daily active users is also 20%, and the company says they have seen more users in North America, Europe, and the Rest of the World.

In late 2021, Snap introduced the augmented reality camera kit on popular shopping platform Flipkart. “As with Flipkart, we have actually seen on our own service on Snapchat, some really positive engagement around commerce-related lenses,” Bobby Murphy, co-founder and chief technology officer, Snap, told HT.

TikTok, the short-form video app which competes with Meta’s Facebook and Instagram apps, reported 1 billion active users globally in September 2021. A look at the trajectory indicates a threat for Meta. TikTok had 55 million users in January 2018, 271 million at the beginning of 2019 and 700 million in August 2020.

Users’ response to Apple’s privacy move?

Facebook (now Meta) was one of the first and the most vocal critics of the move. The platform built a large part of its massive advertising business taking advantage of a system that did not give users a choice and with no disclosure requirements enforced.

Data from global users as well as India-specific suggests a lot of users are choosing privacy. Users, who updated to iOS 14.5 and iOS 15 since, have opted to restrict apps from tracking them, which indicates the lack of a choice was hurting consumers who were served ads when they did not want them. The latest data by analytics firm Flurry, which surveyed 5.3 million iPhones updated with iOS 14.5 or later, indicates that the monthly opt-in rate to stop apps tracking users is 24%. In the US, it is slightly lower at 18%.

Data by AppFlyer says that 46% of all iPhone users worldwide, who saw an ATT prompt on their phone for any app they used, opted out of being tracked. For specific app genres, it is 47% for shopping apps, 53% for financial apps, and 37% for social media apps. In India, the overall opt-out rate across all apps among iPhone users is 48% while it is 35% specifically for social media apps.