Facebook, rechristened as Meta is staring down the bottom of the ad-revenue barrel, ever since Apple came up with a new privacy policy. Apple now requires its apps to ask users for permission to track their activity and share it with other apps or websites by collecting their IDFA tag. The Identifier for Advertisers (IDFA) tag is a unique device identifier that is used in conjunction with cookies and tracking pixels to create a virtual database of each user.
And as we understand, Facebook’s major chunk of the profit pie comes from advertisements which come by selling the user data to a third party.
The change came as part of Apple’s iOS 14.5 update, which launched in April 2021, and forced app publishers to include a pop-up asking for permission to track behaviour for ad sales. If users opt-out, Apple simply cuts off that app from receiving a variety of data used by advertisers, rendering Facebook penniless in the process.
Facebook to take the major brunt of the ad-revenue loss
Facebook, Instagram, and WhatsApp have some of the biggest databases of users and if Meta cannot exploit it, the company’s business model may take a hit. However, it will be the ad revenue of Facebook, the second-largest digital ad platform in the world after Alphabet Inc’s Google, that will bear most of the brunt.
It is being suggested that Apple’s new policy could cost Meta some $10 billion this year in ad revenue. Meta CFO David Wehner earlier this month was quoted as saying, “The impact of iOS overall as a headwind on our business in 2022 is on the order of $10 billion,”
95 percent of users are not allowing ad-tracking
And Meta’s anxiety is understandable. According to fresh reports, since Apple rolled out the privacy policy, a major chunk, approximately 95% of iPhone users who had downloaded the update were opting out of ad tracking. Thus, the prediction from Wehner that Facebook’s ad revenue may take a $10 billion hit in the coming year grows even more ominous.
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And it is a double whammy for Facebook. As reported by TFI, after Meta’s dismal quarterly earnings report showed declining users and surging expenses related to the company’s metaverse project, its stock fell over 25 per cent in one of the trading windows.
In the process the investors wiped out $230 billion from the company’s valuation, making it the biggest one-day loss for a US company.
Meta’s fourth-quarter earnings showed daily users declining for the first time ever. Meanwhile, the company’s profit declined by 8 percent to $10.28 billion in the December 2021 quarter, from $11.21 billion in the same period a year ago.
Metaverse – a big, vague gamble
If you keep the declining user base and the new privacy policy in mind, you can join the dots as to why Mark Zuckerberg fast-tracked the implementation of Metaverse.
Metaverse is a combination of augmented reality (AR), virtual reality (VR), mixed reality (MR). Through metaverse technology, the individuals would be able to enter simultaneously in an alternative universe of the Internet and perform daily tasks.
However, the full implementation of the technology still remains vague. Facebook is putting all its eggs in one basket and if Meta goes bust, it may be the end of Facebook as we know.
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Facebook walking on eggshells
The entry of Facebook into this new world of virtual reality would bring many new sets of issues for the company on top of existing ones. The Facebook brand is already severely damaged given the recent revelations that the company is capitalizing on hate content.
If it builds a “toxic environment” in the form of Meta, there would be no going back as far as the brand value is concerned. Facebook has never felt such a threat to its authority ever since it came into being. However, as is the trend in the technological world, nothing is transient.