Mark Zuckerberg said in a conference call Monday that Facebook experienced revenue headwinds in the third quarter due to Apple’s ATT. The company’s Q3 revenue topped $29 billion, up 35% year-over-year, but fell short of analysts’ expectations.
Zuckerberg also warned that Apple’s new privacy changes, which went into effect in April, is negatively impacting not only the social media behemoth but small businesses as well. “As expected, we did experience revenue headwinds this quarter, including from Apple’s changes that are not only negatively affecting our business, but millions of small businesses in what is already a difficult time for them in the economy. Sheryl and Dave will talk about this more later, but the bottom line is we expect we’ll be able to navigate these headwinds over time with investments that we’re already making today.,” Zuckerberg said.
Facebook COO Sheryl Sandberg mentioned in the call that the Apple’s privacy changes “advantaged Apple’s own advertising business”. He also claimed that it decreased the accuracy of ad targeting and made it difficult to measure the ad campaign performance.
According to a recent research, after Apple’s ATT went into effect, Apple Search Ads (ASA) surpassed Facebook, always the leading force in iOS, in power and volume rankings.
When asked to characterize the proportionate extent of Apple’s privacy changes to revenue loss, Facebook CFO David Wehner stated that this was the “largest factor in terms of Q3 headwinds”, noting that it was the first full quarter of those changes. If that didn’t happen, he says the company expects sequential growth in revenues.
In the second quarter of 2021, Facebook reported that its ad revenue rose 56% Y/Y to $28.580 billion during Q2, up nearly $10 billion from the same period last year. Its total revenue for Q2 hit $29.077 billion, up 56% Y/Y.
Facebook has been one of the companies that criticizes Apple privacy changes the most since the first time it was announced. The company even launched an ad campaign against it in March.
Snap Inc. said in an earnings call last week that Apple’s App Store privacy changes had caused the company to fail to meet revenue expectations for its third quarter.
Facebook also announced on Monday that it was changing its reporting structure to break out Facebook Reality Labs, which covers augmented reality and virtual reality products and services as part of its ambitions to build a metaverse, as a separate reporting segment. The company said it expects the investment in Facebook Reality Labs to reduce overall operating profits by approximately $10 billion in 2021.
Mark Zuckerberg also cited Facebook’s increasing competition for young adult users from Apple’s iMessage app and the rise of ByteDance’s TikTok, saying that retaining and adding members of this demographic segment is crucial to the company’s long-term success.
Facebook has come under increasing criticism in recent weeks for its influence on young users and its efforts to produce products for them, following the Wall Street Journal’s report, which was drawn from Facebook’s internal documents.