Facebook Stock Drops on Q3 Warning - Apple Privacy Impact

Facebook Addresses Impact of Apple’s Privacy Changes on Ad Performance

Facebook recently released an update concerning the effects of Apple’s privacy modifications on its advertising revenue. The company had previously cautioned investors during its Q2 earnings report about anticipating a more substantial impact on its ad targeting capabilities in Q3.

This morning, Facebook reaffirmed this expectation. However, it also revealed that iOS web conversions had been underestimated by roughly 15%, leading advertisers to perceive a greater negative effect than was actually the case.

Conversion Reporting Discrepancies

According to the announcement published on Facebook’s business blog, the precise percentage of underreporting could differ significantly for each advertiser. Nevertheless, the company stated that actual conversions – encompassing actions like purchases and application installations – are likely higher than what is currently reflected in Facebook’s analytics.

As of the current time, Facebook’s stock value has experienced a decline of approximately 4% in response to this news.

Past Metric Issues and Current Concerns

This situation isn’t the first instance of Facebook disclosing inaccurate metrics. Previously, the company had overstated its video ad metrics and was slow to rectify the issue, resulting in legal action. However, in this instance, the metric problem doesn’t portray Facebook in a more favorable light, but rather exacerbates existing concerns.

The company has received feedback from its advertising partners indicating they are observing a larger-than-anticipated impact on their ad investments within the network, prompting anxieties.

Recommendations for Advertisers

Facebook provided advertisers with several recommendations to enhance their understanding of campaign impact and performance in this evolving landscape. It advised waiting at least 72 hours, or the complete optimization window duration, before evaluating performance, rather than relying on daily assessments as previously done.

Furthermore, Facebook suggested analyzing reporting at the campaign level whenever feasible, as certain estimated conversions are reported with a delay. It also recommended that advertisers prioritize web events – such as purchases or sign-ups – that closely align with their primary business objectives.

Improving Measurement Capabilities

To resolve the issues related to improving its measurement accuracy, Facebook stated it is focused on refining its conversion modeling. It is also accelerating investments to address reporting gaps, introducing new functionalities for tracking web conversions, and expanding its ability to measure in-app conversions for already-installed applications.

The company committed to swiftly addressing bugs, including one that recently caused an underreporting of approximately 10%, which had already been communicated to advertisers.

Adapting to Privacy Changes and New Products

In August, Facebook detailed its efforts to adapt its personalized advertising business in response to privacy changes from both Apple and Google, as well as evolving regulations. However, the company acknowledged that these adjustments will require time.

Beyond ad tech updates, Facebook is also developing new products to help advertisers better reach consumers within its applications. Last week, it revamped its business tools, introducing new features and expanding smaller tests designed to provide businesses with increased visibility.

A current test in the U.S. directs consumers to other businesses and relevant topics directly beneath news feed posts. Additionally, businesses can now integrate WhatsApp buttons into their Instagram profiles and create advertisements that redirect Instagram users to WhatsApp business chats.

Long-Term Impact and Advertiser Concerns

Facebook has consistently warned advertisers that Apple’s new privacy features, enabling users to opt out of cross-app tracking on iOS devices, would disrupt its traditional ad targeting methods. The company has repeatedly argued that these changes would disproportionately affect small businesses that depend on Facebook ads to connect with their customer base.

Following the implementation of these changes, Facebook’s concerns were substantiated by studies revealing that a very small percentage of users are choosing to enable tracking on iOS.