Why Facebook’s Ad Business Will Take a Hit — and What Advertisers Should Do
On September 22, Facebook made an unusual announcement well ahead of its third-quarter earnings, which won’t be shared until late October. In a blog post, Facebook indicated that its third-quarter results will take a hit because of the impact of Apple’s increased privacy controls. Let’s take a look at the news and what it means.
What Facebook Announced
- Facebook confirmed that for the third quarter, the company’s advertising business will take a financial hit because of the impact of Apple’s Application Tracking Transparency (ATT), which went into effect in 2021 with a recent iOS update on users’ personal devices.
- Under ATT, users are asked to give apps permission to track their behavior on their Apple devices. Facebook needs Apple users to give apps permission to track their behavior; Facebook has built a thriving advertising business based on its ability serve up targeted ads to iOS users based on their behavior off Facebook. But as many as 96 percent of users in the United States are opting out of having their behavior tracked.
- In a blog post, Graham Mudd, vice president of Product Marketing, Facebook, wrote, “As we noted during our earnings call in July, we expected increased headwinds from platform changes, notably the recent iOS updates, to have a greater impact in the third quarter compared to the second quarter. We know many of you are experiencing this greater impact as we are.”
- Mudd also said that Facebook underreported iOS web conversions by approximately 15 percent. “We believe that real world conversions, like sales and app installs, are higher than what is being reported for many advertisers,” he wrote.
What Facebook’s Announcement Means
- Facebook’s war with Apple will intensify. Apple could find ways to impose even more privacy controls.
- More advertisers will bolt to the Android operating system and take their ad business to Google.
- Facebook will be forced to become more transparent to ad partners about its ad performance, especially after admitting that the company underreported iOS web conversions.
- Facebook will probably devise more ways to mine first-party data from its own platform and Instagram to sell ad space.
What Advertisers Should Do
- Consider tapping into your own first-party data more effectively to create ads (and True Interactive can help you do so). For example, collect more first-party data by using cookies to understand who visits your site; or run a promotion that collects email addresses. Collect purchase data if applicable to your site.
- Consider relying on advertising platforms such as Amazon and apps such as Snapchat and TikTok that have strengthened their own ad products through their own proprietary first-party data.
- Watch for the emergence of new tools and approaches. Apple’s ATT will inspire the emergence of workaround tools as well as approaches for developing personalized content. This is happening already as Google adopts privacy controls.
- Review Facebook’s advice for how to analyze your performance and adapt your ad strategies on Facebook (or ask your agency partner to do so for you). Mudd provided some detailed steps to take in his post.
- Consider negotiating more favorable rates for your ad account with Facebook if your performance is dropping but you still want to work with Facebook.
- Don’t panic and change your ad strategy completely. This situation is still evolving.
At True Interactive, we’re doing the heavy lifting to help our clients navigate these changes. Bottom line: be ready to adapt.