Are those targeted ads in your Facebook feed a little less creepy these days? You can thank Apple for that. It’s been a year since the iPhone maker introduced a pop-up requiring apps to ask its users if they consent to being tracked across the web.
With about 75% of users selecting “Ask App Not To Track,” Facebook and Instagram’s parent company Meta was hit with the economic equivalent of a nuclear missile. After reporting slowing earnings in February, the stock plunged 26% in one day, wiping out $251 billion in market value, the biggest decline in history.
“Facebook has talked about seeing a $10 billion hit to their ad revenue this year because of the Apple privacy changes,” said Mark Mahaney, head of the Internet Research Team at Evercore ISI. “Me thinks that that’s a little bit exaggerated, but there’s no question: It’s a big number out there.”
The seemingly harmless prompt that decimated the revenue of the world’s largest social network is called App Tracking Transparency.
“ATT is about returning control to its users, about giving them a say over how their data is handled,” Apple CEO Tim Cook said.
How tracking works
Each iPhone has a unique number called IDFA, identifier for advertisers. It helps advertisers identify you, see what you’re browsing and buying, and build a highly-detailed user profile on you and your online habits, all while concealing your personal information.
This feature brings you customized ads. Let’s say you downloaded a new shopping app and hovered over a couch for a bit, then closed the app. The app records your IDFA and because the company really wants to sell you that couch, it goes to Facebook asking to advertise to that specific IDFA. That’s how an ad for a sofa you glanced at in one app ended up on your Facebook feed.
“Somebody would see the ad and they could track that user, using personally identifiable information, they could track whether or not that person acted on that ad several websites later,” Mahaney explained.
That kind of cross-platform marketing feedback — whether the ad resulted in a sale — was invaluable to advertisers. Facebook’s ability to provide it lined its pockets with billions in profits.
Ask App Not To Track
If the iPhone user asks the app not to track, the IDFA doesn’t get shared and Facebook can’t attribute its ad to a sale, devaluing its advertising platform.
“It has a sizable impact on Facebook, and more on Facebook than anyone else, because Facebook was most effective at using that data in the past to target ads,” Mahaney said.
Meta is not the only corporation losing major revenue over ATT. Platforms like Snapchat, Twitter and YouTube are also adversely affected. But when it comes to targeted ads, these companies are down, not out. They are still tracking users on their own apps and people can still be targeted by aggregate data — the ads just won’t be as customized.
Fighting for “Allow”
In an effort get people to click allow instead of blocking tracking, companies are trying to sell users on the more personalized ad experience. Opt-in rates are growing from when the technology was first introduced in 2021, according to research firm Adjust. The study shows games also achieve higher opt-in rates.
