The stock price of Meta plummeted when the company announced that Apple’s privacy features could cost the company billions of dollars this year. The company isn’t the only tech company to take the brunt of.
Apple’s idea of a more private internet isn’t always a profitable option for businesses that rely heavily on advertising income.
This lesson was evident on Wednesday , in an earnings report by Meta, the company which Mark Zuckerberg founded as Facebook. Meta claimed that privacy-related features launched by Apple this year could end up costing Mr. Zuckerberg’s firm $10 billion in lost revenue this year.
The news, in conjunction with more spending in the context of Meta is trying to get its attention on the concept of a metaverse, sank Meta’s price by more than 26 percent in the early hours of Thursday. The founder of the company, Mr. Zuckerberg said Wednesday that the changes made by Apple and new privacy laws in Europe were “a clear trend where less data is available to deliver personalized ads.”
Meta’s warning and its plummeting stock price served as warnings that even among the giants of tech, Apple holds extraordinary sway due to its control over the iPhone. The tech industry also received an unambiguous reminder that a long-planned change in how information about people’s personal information could get used on the internet has had a profound influence in Madison Avenue and internet companies who have built businesses around the sale of ads.
“People can’t really be targeted the way they were before,” said Eric Seufert, a media strategist and the author of Mobile Dev Memo which is a blog on mobile ads. “That disrupts the way we do business. It’s not just a minor problem that can be solved with a couple of adjustments. It’s a matter of rebuilding the basis of the company.”
Other online companies that depend on advertising felt the shakes as well. Smaller companies seem to be more agile as Meta in their reaction to the changes made by Apple.
Snap’s shares Snap that reported its fourth quarter results in the afternoon of Thursday, dropped approximately 17 percent earlier during the day. However, prices rebounded after hours trading, after the company announced that it had its first profits. The shares that of Twitter and Pinterest were also down following the company’s earnings report. However, they were able to recover in trading after hours on Thursday following Pinterest also reported higher-than-expected earnings.
Apple’s new policies have ramifications that could hurt the wallets of consumers and wallets, Seufert said. Seufert said, though people are generally choosing not to be targeted. Even though Meta and other large media companies have devised new ways to target customers with ads, a few smaller companies, whose advertisements cannot be seen by potential customers from the beginning, have come up with an alternative solution by raising prices.
Apple introduced significant modifications to privacy settings on the mobile OS in the year and allowed iPhone users the ability to decide whether or not advertisers can track their activities. Since Apple has introduced this feature, the vast majority of iPhone users have chosen to disable trackers.
Just 25% of iPhone users in the world have opted to be monitored by advertisers, as per the data that was released at the end of December, by an analytics firm Flurry. This means that a large portion of iPhone users aren’t allowing personal tracking that advertisers prefer to use.
It’s been a harrowing shift for advertisers, who have been tracking people for years online to figure out the amount of sales their clients were generating. They also use the tracking of products to show them again that customers have seen but have had not yet bought to remind users that it’s the right time to purchase. However, for privacy-minded activists the new policy is a welcome halt to surveillance, which puts the power back into the hands ordinary users of technology.
“We believe the impact of iOS overall is a headwind on our business in 2022,” said Dave Wehner, Meta’s chief financial officer, in the call with analysts on Wednesday. “It’s on the order of $10 billion, so it’s a pretty significant headwind for our business.”
Google has also taken steps that have reshaped the industry of advertising. In the last month, it unveiled its plan for the way Chrome the world’s most popular web browser, may in the future end traditional tracking methods to serve advertisements. It also introduced a new feature named Topics, which will notify advertisers of the area of interest for a user -like “fitness” or “autos and vehicles” Based on the most recent three weeks of a browser’s history of web browsing.
The loss that Meta estimates due to the limits is similar to the amount that the company is losing in the metaverse. Meta stated that its move towards its the metaverse -it could aid in its regaining Apple’s influence affecting its profits. Meta sees metaverse as the future of the internet, one in where people can be able to share experiences in virtual reality. It has lost more than 10 billion dollars in 2021, as it developed the virtual reality glasses and smart glasses that allow users to gain access to the metaverse.
While Meta claimed that its revenue increased by 20% in the three months that ended in December, $33.7 billion, as compared to the same timeframe a year before however, the company’s quarterly earnings decreased by 8 percent up to $10.3 billion.
Mr. Wehner also said that Apple’s iOS modifications have boosted the advertising business of Google and is not dependent on Apple to provide advertising data.
Snap the creator of Snapchat, the maker of Snapchat app as well as the AR glasses Spectacles announced in its third-quarter report on earnings in the month of October, that Apple’s privacy policies have had an unexpected effect on the business. The company is however adapting, Snap said in its fourth-quarter earnings report released on Thursday, and the largest effects of Apple’s privacy changes could be in the background.
“We are making solid progress,” said Jeremi Gorman who is Snap’s chief of business. Snap provides the tools for measuring its own that allow advertisers to measure the impact of their advertisements. the tools are employed for more than 75 percent of the direct response advertisers according to Ms. Gorman said.
The company’s earnings statement, Snap declared that it was able to surpass analyst expectations in terms of the growth of its user base and revenue. In the quarter of the year 2021 Snap’s revenue reached $1.3 billion, which was a 42 percent rise from the same time a year prior. The number of active users per day increased to 319 million, which is a 20% increase. The company’s profit is $22.5 million.
Snap’s share price retreated following the announcement, soaring over 50 percent during trading after hours on Thursday.
In the third quarter in the calendar year the revenue of Pinterest rose to $847 million. This was increasing by 20 percent from the same time last year according to the company on Thursday. The profit of the company was $175 million. This was a decrease of 16 percent from the 2020. The share price of Pinterest was up 29 percent during trading after hours.
It has been the case that Twitter claims that the privacy policies caused only minor disruptions to its operations because the majority of its advertising revenue came from advertising campaigns for brand awareness and major events, such as the Olympics instead of targeted ads. Twitter is scheduled to announce its fourth-quarter results on February. 10.
However, Apple announced its fourth-quarter results last week, suggested it was profitable for privacy. Despite disruptions to supply chains, Apple said that sales of iPhones totaled $71.6 billion, an increase of 9 percent over the year ago. The company that makes smartphones announced an 11 percent rise in sales and 20% growth in profits.
Apple makes privacy major element of its marketing strategy on it’s iPhone along with other items, giving users the choice of opting out of being tracked and offering measures to make tracking difficult for the browser it uses, Safari. However, Apple has not stopped allowing applications like Facebook use their apps to track users on a global basis in the event that they don’t attempt to identify individuals.
In the year 2000, Timothy D. Cook the Apple’s chief executive making the company’s message clear stated that the industry of advertising was now an ecosystem made up of “trackers and hucksters just looking to make a quick buck.”