Facebook’s parent company served up the starkest sign yet of how Apple Inc.’s new ad-privacy policy is roiling the digital-advertising world.
Discussing Meta Platforms Inc.’s quarterly earnings and its outlook for the current year that shocked investors, Chief Financial Officer Dave Wehner on Wednesday said the company expects the Apple policy to cost it more than $10 billion in lost sales for 2022. That is equivalent to about 8% of its total revenue last year.
“It’s a pretty significant headwind,” Mr. Wehner said on a call with analysts.
Apple introduced the changes last April, altering its iPhone software to require apps to ask users whether they want to be tracked. The move seriously limited the ability to gather data through apps that is used to target digital ads and drove advertisers to alter spending patterns. Meta had said previously that the Apple move was hurting its ad business, but hadn’t given an estimate for how much.
Meta “was impacted significantly and it’s going to be a continuous problem,” Daniel Newman, a principal analyst at Futurum Research, said Wednesday.
The guidance was part of a quarterly report that raised multiple concerns for investors and sent Meta’s shares plunging more than 20% in after-hours trading—the equivalent of a $175 billion-plus loss in market capitalization. Meta also reported losing about a million daily users globally in the last quarter, and its sales outlook for the current quarter fell short of Wall Street expectations. The company expects expenses to jump around $20 billion or more this year as it pursues Chief Executive Mark Zuckerberg’s bet on the metaverse, the online virtual world some see as the next evolution of the internet.
The gloomy outlook also tainted investor sentiment on other ad-focused companies. Snap Inc., which suffered a 20% share decline when it previously said it expected a revenue hit from the Apple move, declined after Meta’s report on Wednesday. Snap is expected to provide more insight on how its business has been affected when it reports quarterly results after the bell Thursday. The stock was down more than 17% in premarket trading.
Booming digital ad spending has been a boon for Mr. Zuckerberg’s company. Facebook, as the company was known before its renaming last year to Meta, enjoyed years of strong revenue driven in significant part by its ability to track the behavior of users of apps and websites and enable advertisers to deliver highly targeted ads based on that information. The Apple policy change disrupted that ability, with a large majority of users, according to some measurements, opting not to be tracked. Meta says that policy has made ad targeting more difficult and measuring the impact of placements harder.
Apple’s move has had reach beyond social-media companies. Videogame company Zynga Inc., which specializes in smartphone games like Words With Friends and has its own advertising platform, suffered an earnings hit from the new Apple policy that led its shares to drop sharply last year. The company ended up selling itself to Take-Two Interactive Software Inc. for $11 billion last month.
While there clearly is an impact from Apple’s policy, Brian Wieser, GroupM’s president of business intelligence, said the impact on Meta might not be as great as the company’s executives have suggested. “I’m skeptical that it’s as bad as they’re conveying,” he said. The digital ad business remains healthy, he said, pointing to Google parent Alphabet Inc.’s strong earnings this week seemingly largely unaffected by the policy changes.
Twitter, in its most recent earnings report in October, said it expected to be largely unaffected by the Apple policy because it isn’t as reliant on targeted digital ads as some of its rivals.
Meta’s CFO, Mr. Wehner, said Apple’s policy treats Google differently, suggesting that the difference might reflect a longstanding business relationship between the two companies. “We believe Google’s search ad business could have benefited relative to services like ours that face a different set of restrictions from Apple and given that Apple continues to take billions of dollars a year from Google search ads, the incentive clearly sits for this policy discrepancy to continue.”
Google’s flagship search-ad business relies on search terms customers input to reveal what they are interested in, rather than on data collected from app and web tracking.
Apple didn’t immediately respond to a request for comment. Google declined to comment.
Google said its search and advertising revenue rose 36% and topped $43 billion in the most recent quarter, led by strength in retail-related ad spending, with YouTube advertising up 25% from the year-earlier period. The company didn’t address the Apple situation but previously said the changes to user tracking had a modest impact on YouTube revenue.
Sheryl Sandberg, Meta’s chief operating officer, said on Wednesday’s earnings call that the company was working on ways to measure the impact of the ads it sells and to find ways to show relevant ads without collecting personalized data. “That’s going to take us time.”
