Upcoming iPhone Privacy Feature Will Put Facebook At The Greatest Risk

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MKM Partners said on Tuesday that as the online advertising industry prepares to welcome changes in the user’s iPhone settings in the name of protecting privacy, Facebook and Snap will be more susceptible to the impact of this move than other companies in the industry.

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Apple’s plan to make a change is that the company will provide users with a privacy option that allows them to share their advertising ID and open an application in a prominent position at the time. In this way, when a user uses an application such as Facebook, the system will require the user to first enable the tracking function. Then the application can track user data to deliver targeted advertising. Companies such as Facebook worry that Apple’s notification will make users unwilling to enable tracking. Thus, it will limit their ability to place targeted advertising, which is the core of their business.

Privacy Policy Or More Revenue?

Online advertising companies currently use IDFA to deliver targeted ads and measure their effects. But Apple’s upcoming changes should greatly affect advertisers’ ability to place ads, because people may choose not to enable tracking.

MKM analysts said that it built a framework based on seven factors to determine what risks the above changes will bring to online advertising companies. The factors include scale, access to first-party data, exposure to iOS devices, relative revenue contribution from app install ads, off-platform ads, ads purchased by small businesses and ads purchased by industries relying heavily on paid mobile user acquisitions. Broadly, those companies include those in gaming, dating, ride-hailing and streaming video.

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‘However, when it comes to gravitational pull, relative ad efficacy, and access to 1st party data vs. other sub-scale platforms, programmatic ad networks and publishers, we expect the Big Six online ad companies to fare better than the rest of the industry,’ they wrote. ‘We expect more attention on this issue as we approach 4Q earnings/2021 outlook, and we’d be buyers on weakness, particularly of FB and SNAP shares, attributable to upcoming iOS 14 changes.’

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Bank of America analysts also stated in a report released in December last year that Facebook and Snap face the greatest risks due to the above-mentioned changes. They should have an adverse effect on Facebook’s revenue by 3% and Snap’s revenue by 5%. They also believe that Twitter also has a certain risk exposure to mobile application downloads. However, it is relatively small in comparison to Facebook and Snap. Pinterest and Google face the smallest risk exposures.

What Does Facebook Think Of This?

Facebook has always opposed this change. When the company recently stated its position, it not only advertised in newspapers, but also launched a new website and published a blog post outlining its arguments against Apple’s doing so. Facebook claims that this change will ‘threat the personalized advertising that millions of small businesses rely on to find and reach customers.’ In its blog post, Facebook accused that Apple’s new regulations ‘are about profit, not privacy,’ and that it is using its control of the App Store to engage in anti-competitive behavior at the expense of developers and small businesses.

Apple said that the privacy function allows iPhone users to have more control and knowledge of how various apps track their data and use it for advertising.

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