Snapchat on an iPhone.
The social media company Snap (which runs Snapchat) and the software company Unity for game development have joined Facebook to warn their investors that Apple’s looming change in ad tracking will negatively impact their businesses.
As previously reported, Apple plans to use the next iOS update (iOS 14.5, which appears in early spring) to implement a requirement that all apps on the platform must select users to track users with IDFA (ID for advertisers) labels. IDFA tags are used to track what users are doing in various applications to target ads more effectively.
Social media giant Facebook has told its own investors that the upcoming change to Apple’s operating system could have a very negative impact on its advertising revenue, as this kind of tracking-based advertising targeting is one of Facebook’s most important ingredients for success.
It has also taken out full-page newspaper ads claiming that one of the effects of targeted ads becoming less effective as a result of this change is that small and local businesses that rely on Facebook ads will have higher costs to reach users, which businesses are negatively impacted though.
Unity in a way made a similar case. Unity operates an advertising platform for mobile apps and earns much of its revenue from game and app developers on platforms like iOS. The company’s leadership said in its earnings call yesterday that the change will affect the ability of app and game developers to get new customers efficiently and optimize their value for life. The company predicts that its revenue will drop to $ 20 million in 2021 as a result of the change. However, it is estimated at only 3 percent of the company’s total annual revenue.
Snap (which offers many sophisticated advertising products) warns investors about the consequences of the change, but tries to give it a more confident tone. “We admire Apple and believe they are trying to do the right thing for customers,” said Jeremy Gorman, chief business officer. She said she believes Snap is well positioned to prepare advertisers for the change, even if the potential impact is acknowledged.
As a result of concerns about the Apple change, Snap shares fell 7 percent in after-hours trading despite an otherwise positive business picture, including a 22 percent increase in daily active users year-on-year. However, the stock rose above its previous levels during today’s trading.
When The Information reported that Facebook leadership is seeking external legal advice for a possible lawsuit against Apple, it also said that many Facebook employees are opposed to the move because they do not consider Facebook a compelling victim. Although Snap and Unity have not organized PR or legal battles against Apple like Facebook, the public may find Snap and Unity more sympathetic.
Snap is popular, but it does not dominate in the same way that Facebook does, and it has been less involved in controversies over the spread of misinformation or privacy scandals. And Unity’s pleasant cause for concern is that it will miss out on revenue because its customers – large and small game and app developers – will drop their own revenue.
Nevertheless, the companies plan to comply with Apple’s required changes, and the changes are expected to begin in the spring. Apple has already updated its app review guidelines to reflect the new policies.