Apple’s powerful move to kneecap Facebook ads is working

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Below is a selection from Big Technology, a newsletter from Alex Kantrowitz. To get it in your inbox every week, you can sign up here.

Facebook this week sent its high-level executives to ask customers to stick with it. They weren’t, of course, visiting to discuss the Wall Street Journal’s recent exposé about the company’s unsavory practices. But instead, Facebook VPs, including Simon Whitcombe and Graham Mudd, spoke to advertisers about Apple’s anti-tracking initiative, the only thing that directly damages the company’s ad effectiveness and bottom line.

“This is where, when something actually affects their business, they join forces and move,” said a Facebook advertiser who attended the meetings.

“It’s been all hands on deck for weeks,” Mudd said in an interview.

Indeed, Apple is doing more damage to Facebook than any of its rolling series of scandals to date. The changes Apple made to iOS 14.5 — asking people to opt out of apps that track them around the web — are causing a stir among advertisers who rely on Facebook to support their business. Performance marketers, i.e. those who want you to buy right after clicking, are especially struggling. The masses, they think, have chosen not to let Facebook follow Facebook, so they can’t be sure if people will buy their products after seeing their ads. Facebook expects them to spend less money as a result.

“Just going completely blind” is how Aaron Paul, a performance Facebook marketer, described it. Paul said his company, Carousel, was spending millions of dollars every day on Facebook to several hundred thousand dollars. Before the iOS changes, Facebook was generating 80% of the traffic Carousel sent to its product pages. Now that’s 20%.

Apple’s iOS changes could cause irreparable damage to Facebook’s advertising activities. Today, Paul and his fellow performance buyers have shown that it is risky to rely on one channel (albeit a very effective one). So they want to diversify their ad spend. Paul said he has moved his advertising budget elsewhere, including “Snapchat and TikTok, as well as silent killers like email.” On Twitter, Facebook marketers discuss Apple’s changes almost unanimously agree they had to follow.

Concerns about Facebook’s ability to withstand Apple’s onslaught are already translating into rapid fallout in the stock market. Shares of the company fell nearly 4% on Wednesday and some loyal investors bailed out. “I’ve probably sold almost half of that position in the past two days,” trader Jon Najarian told CNBC on Wednesday. Facebook, he added, was once his second-largest company.

People unsubscribe from Facebook for a reason: they no longer trust the company with their data after years of proof that they shouldn’t. But the context of Apple’s power movement is also important. The company competes with Facebook’s messaging apps and is working hard to build a robust advertising platform of its own.

“I don’t think Tim Cook is this privacy benevolent person,” said Kelcey Lehrich, CEO of 365 Holdings, an e-commerce brand owner and online advertising company. “They make strategic decisions that affect market capitalization, not practical decisions that serve their customers or their users,” he said broadly of the Big Tech companies. Apple did not respond to a request for comment.

“I think we’ve shared our thoughts on iOS 14 and at this point I have nothing more to add,” Facebook’s Mudd said, expressing his company’s anger as diplomatically as possible.

Apple’s power play is already making these marketers seek alternatives to Facebook more than any scandal. And unfortunately for Facebook, it’s just that Apple is one of the alternatives.

“Apple is super powerful and they are doing all this to build their own ad platform,” said Paul, Facebook’s performance marketer. “My goal is to have our team learn the ad platform when it comes and be good at it. See if that works.”

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