Snapchat on an iPhone.
Social media company Snap (which manages Snapchat) and game development software company Unity have joined Facebook to warn investors that the impending change in Apple’s ad tracking will negatively impact their business.
As previously reported, Apple plans to use the next iOS update (iOS 14.5, which is expected to be released in early spring) to implement a requirement that all apps on the platform obtain user permission to track users with IDFA tags (ID for advertisers). IDFA tags are used to track what users do across multiple apps to target advertising more effectively.
The social media giant Facebook told its own investors that the change in Apple’s operating system could negatively impact its advertising revenue, because this type of tracking-based ad targeting is one of Facebook’s main ingredients for success.
It also withdrew full-page newspaper ads, claiming that an effect of targeted advertising becoming less effective as a result of this change is that small local businesses that rely on Facebook advertising will have higher costs to reach users, negatively impacting such companies as good.
Unity made a similar case, in a way. Unity operates a mobile app advertising platform, obtaining much of its revenue from game and application developers on platforms such as iOS. The company’s leadership said in yesterday’s earnings conference call that the change will affect the ability of game and application developers to efficiently gain new customers and optimize their lifetime value. The company predicts that its revenue will fall by $ 30 million in 2021 as a result of the change. However, this is estimated at just 3% of the company’s overall annual revenue.
In turn, Snap (which offers many sophisticated advertising products) alerted investors to the effects that the change could have, but tried to adopt a more confident tone. “We admire Apple and believe they are trying to do the right thing for customers,” said business director Jeremi Gorman. She said she believes Snap is well positioned to prepare advertisers for change, even when the potential impact has been recognized.
As a result of concern about the change on Facebook, Snap’s shares fell 7 percent in after-hours trading, despite a positive business picture, including a 22 percent increase in daily active users year after year. The stock rose again above its previous levels during today’s trading, however.
When The Information reported that Facebook’s leadership was looking for an outside lawyer for a possible lawsuit against Apple, it also said that many Facebook employees were opposed to the change because they didn’t see Facebook as a “convincing victim”. Although Snap and Unity have not orchestrated legal or public relations battles against Apple like Facebook, the public may find Snap and Unity to be more sympathetic.
Snap is popular, but doesn’t dominate in the same way as Facebook, and has been less involved in controversies over the spread of misinformation or privacy scandals. And Unity’s stated concern is that it will lose revenue because its customers – large and small game and application developers – will see their own revenue drop.
However, companies plan to comply with the changes required by Apple, and those changes are expected to be released this spring. Apple has already updated its application review guidelines to reflect the new policy.