Facebook ad revenue hit hard by Apple’s privacy changes

The Facebook logo can be seen in Davos, Switzerland on January 20, 2020. REUTERS / Arnd Wiegmann / File Photo

October 25 (Reuters) – Ahead of Facebook Inc’s (FB.O) financial results on Monday, the social media giant is expected to be hit harder than others in big tech by Apple Inc’s iPhone privacy changes (AAPL.O), investors fear, after Snap Inc (SNAP.N) missed its revenue targets last week.

Apple’s privacy updates, which began rolling out in April and prevent advertisers from tracking iPhone users without their consent, have led investors in digital advertising companies to fear that access will be reduced. to data will disrupt the nearly $ 100 billion mobile advertising market.

Snap confirmed his fears on Thursday when he reported that Apple’s changes were hurting its ability to measure whether its ads lead to website visits or sales, and a measurement tool provided by Apple has failed. worked as well as expected. Read more

Shares of Snap fell 25% and dragged down shares of Facebook, Twitter Inc (TWTR.N) and Alphabet Inc (GOOGL.O), all of which generate income by selling digital ads.

Ygal Arounian, managing director of internet equity research at Wedbush Securities, said in a research note after the Snap results, the ramifications of Apple’s privacy policy.

Ad revenue from Facebook, the world’s second-largest digital advertising platform after Alphabet Inc’s Google (GOOGL.O), is the most likely to be affected relative to the company’s tech peers, said the companies. Evercore ISI analysts in a research note.

Like Snap, the bulk of Facebook’s advertising activity comes from direct response advertising, an industry term that refers to the sellers and buyers of ads who use data about information such as the devices that consumers use and what they’re looking for, to place ads in front of interested audiences with the goal of quickly generating sales or website visits.

Analysts are targeting $ 29.5 billion in third-quarter revenue, a 37% increase from the previous year, according to IBES data from Refinitiv. Facebook shares have risen 19% year-to-date.

Last month, Facebook warned that Apple’s changes caused it to underreport the results of its ads on iOS devices and said the changes made it more expensive and harder for brands to advertise on Facebook. . Read more

The social media network has been one of the fiercest critics of Apple’s updates, arguing it would hurt small businesses that rely on personalized advertising to increase sales.

On the flip side, Twitter, which releases third-quarter results on Tuesday, will likely be spared because the social media site is primarily used for branded advertising, said Audrey Schomer, senior analyst at research firm eMarketer.

Branded advertising, which Twitter said in July accounts for 85% of its advertising activity, is a strategy businesses use to educate consumers about a business or its values. These ads are not as targeted to specific users, and therefore less dependent on data from a user’s iPhones or devices.

Google is also protected from iPhone privacy changes because much of its use comes from desktop computers, and promoted results placed on Google searches are not dependent on iPhone data, Arounian said. Alphabet will release its third quarter results on Tuesday.

Reporting by Sheila Dang in Dallas and Nivedita Balu in Bengaluru Editing by Peter Cooney and Matthew Lewis

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