Platforms that rely on targeted ads for revenue were unequally impacted by Apple's data crackdown last year, earnings reports from Meta, Google and Snapchat showed this week. Meta's Facebook, for one, hurt the most.
The social giant's troubles signaled that performance advertisers, who are looking to drive things like app downloads and sales, shifted some of those dollars to other apps.
Google, it seems, could have also benefited from Apple's data-sharing restrictions.
David Wehner, Meta’s chief financial officer, even said in an earnings call that search ads held up better under Apple’s rules. “Search ads could have access to far more third-party data for measurement and optimization purposes than app-based ad platforms like ours,” Wehner said.
Wehner suggested that Apple’s policies favored Google search, because web browsers were not subjected to the same data permission rules. Apps on Apple devices need to ask consumers for their permission to track them, while a web browser doesn’t have that same prompt; searches are often done within mobile web browsers.
Advertising experts said marketers are leaning more on search, mobile, video and shopping ads on Google in order to make up for lost performance on social media. “If you talk to anyone who has a direct-to-consumer business today, they’re struggling,” said an e-commerce advertising executive, who spoke on the condition of anonymity. The exec was not authorized to publicly discuss Facebook ad performance on behalf of brands. “The playbook that advertisers amassed over the last decade has now been made useless.”
The e-commerce exec said that Facebook advertisers would likely adjust by focusing on “mid-funnel” goals in their ad campaigns, like raising broad awareness of the brand and relying less on generating direct sales.
Meanwhile, the upstart TikTok is growing as a direct sales channel because its algorithm is equipped for targeting consumers. And Google continues to be a strong component of online sales strategies. “Brands need high-intent converting traffic,” the e-commerce exec said. “Think about places with high-intent, like search traffic. And TikTok essentially is surfacing to you content that people otherwise would have searched for.”
Meanwhile, Amazon and other retailers are seeing benefits accrue with their ad platforms, as major brands pour money into their search advertising products, as well, to promote products on e-commerce sites, the exec said. There also is a trend of advertisers putting more money into programmatic advertising online to run direct-response performance ads on websites. Amazon's ad business rose 32% in the fourth quarter, hitting $9.7 billion, according to its earnings report, which revealed exact ad sales figures for the first time.
In its earnings report, Google identified major retailers like Walmart and Warby Parker as top brands that were adopting its full complement of ad products to drive sales from search to YouTube.
Meanwhile, Facebook’s ad auction dynamics have changed with more ad impressions being served at higher rates. Ad prices rose 26% year over year in 2021, Meta said this week.
Brian Wieser, global president of business intelligence at GroupM, said the ad inflation could have come because advertisers need to buy more ads to drive the same results as before the Apple changes.
Meta said in its earnings report that it expected ad revenue to only grow between 3% and 11% in the first quarter this year, generating up to $29 billion. Meta expected Apple policies could lead to a $10 billion hit to ad sales in 2022. In the fourth quarter, Meta ad revenue was up 20% year over year to $32.6 billion. Meta also said that TikTok was grabbing more of people’s attention, biting into the social network’s dominance.
Meanwhile, Google’s search ad revenue was up 35.7% in the fourth quarter of 2021, reaching $43.3 billion. And Google’s overall ad revenue rose 32.5% year over year to $61.2 billion. Snap also saw robust growth, with ad sales up 42% in the fourth quarter to $1.3 billion.
Facebook has been hit harder than Google or Snap for a number of factors, Wieser said. For Snap, the company is smaller, so it is expected to grow at a faster rate than Facebook and its sibling Instagram. Snap has attracted more direct-to-consumer marketers after its ad platform evolved with augmented reality e-commerce tools, and integrating measurement more closely with Apple’s platform. Snapchat said advertisers, representing 75% of its direct-response ad revenue, use its new first-party data measurement product.
“Whatever specific product adaptations they needed to make, they made,” Wieser said.
Snapchat still said it is affected by Apple’s changes, too, with marketers with the highest performance goals to drive direct sales impacted the most. Snapchat said marketers were using its ad platform for more app install campaigns and to drive clicks to their sites. Snapchat expected its revenue, most of which comes from advertising, to grow about 40% year over year in the first quarter, generating more than $1 billion.
An ad tech CEO, who spoke on the condition of anonymity, said Google has structural advantages over Facebook, because its core search advertising is still effective at hitting people with highly relevant ads.
“It’s surgical marketing, even if don’t have permission to track,” the ad tech CEO said.