Social media is having a moment.
In April of 2021, Apple made a big change to its privacy controls, limiting the tracking capabilities of digital advertisers and enabling iPhone users to opt-out of data sharing. It seemed clear at the time that this could fundamentally reshape digital reality, but now we're finally seeing how much all that private data was really worth.
Several earnings reports from major social media companies, including Facebook, Twitter, and others, revealed a $278-billion fallout from Apple's privacy changes, according to an initial report from Markets Insider.
Apple's privacy update will incur more costs on social media in 2022
At the core of Apple's update was the refurbished choice offered to users to opt-in to ad-tracking software from social media apps, including Twitter and Facebook, instead of having to manually opt-out in the iOS settings (and at times, that felt like navigating a labyrinth). With the new update, a pop-up would appear whenever users began using an app that leverages advertising and user data collection for revenue. This was a significant win for privacy advocates, who, among other things, disagreed with the reality of social media platforms making money from selling user engagement. But Meta Platforms lost roughly $10 billion in annual revenue, said CFO David Wehner during the earnings call, noting that the missing user data made it more difficult for the firm to deliver targeted advertisements to the consumers most likely to click.
"Like others in our industry, we faced headwinds as a result of Apple iOS changes," said Meta's Chief Operating Officer Sheryl Sandberg during the call, according to the Markets Insider report. "Apple created 2 challenges for advertisers: one is that the accuracy of our ads targeting decreased, which increased the cost of driving outcomes; the other is that measuring those outcomes became more difficult." If it sounds like Meta is having a hard time dealing with the new privacy standards, just wait — it gets harder: the self-proclaimed future of the metaverse anticipates the fallout from Apple's change will "moderately increase" as 2022 goes on.
Social media thrives on user tracking
"We believe management's tone around iOS impact has deteriorated, and what was once described as 'manageable' now appears to be a $10B revenue headwind in 2022," explained JPMorgan in a Thursday note, according to an initial MarketWatch report. And the perceived weakness of social media companies, in turn, convinced investors to sell at astounding rates, with Meta Platforms dropping 22%, Snap by 18%, Twitter by 8%, and even Pinterest, by 11%. The combined loss of $278 billion in market value is definitely a worry for Big Tech platforms, but for the rest of us, it also reveals something else.
Social media is not a monolith - Nearly $300 billion. That's just shy of a full year's worth of user tracking on social media websites. By merely using social media, Facebook, Twitter, and other firms have profited immensely. In May of 2021, with the new iOS privacy update installed, only 4% of U.S. citizens had voluntarily allowed user tracking, affecting the "$189 billion mobile advertising industry worldwide," said Flurry, a Verizon-owned analytics firm, on its website. By November that year, these social media platforms had experienced revenue losses of roughly $10 billion — which means the effects of Apple's policy may have snowballed in the final weeks of 2021. Whether or not you love social media companies, their central role in public discourse, politics, and even science communications have come to seem immovable. But without our user engagement and tracking data, they are vulnerable to serious revenue losses.