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Apple’s ad changes wiped $142 billion off Snap, Facebook, and other online ad giants

October 23, 2021, 1:16 AM UTC

In early February, Evan Spiegel played it cool when asked about Apple’s divisive ad-tracking changes in an interview with CNBC.

The cofounder and chief executive of Snap, the ephemeral messaging service beloved by youngins, said his company was “well prepared for these changes.” He added that they were “in line with our privacy philosophy” and were “a good thing overall for consumers, even if it’s a little disruptive for advertisers in the near term.”

Spiegel had reason to react nonchalantly. Snap’s stock had just surged nearly 270% year-over-year to $63. The boost was the result of blowout earnings, which came from a digital ad bonanza striking just as pandemic locked-down kids flocked to the app. The company was on a Snapstreak.  

But Spiegel’s confidence belied the business’s vulnerability—that “little disruption” turned out to be quite a lot. Since Snap reported earnings on Thursday, the company’s stock has plummeted nearly 27% to $55. Altogether, $32 billion vanished from its market capitalization, a 24-hour disappearing act rivaling, in its celerity, one of its trademark rainbow-barf-filtered selfies. Streak kaput.

Investors, apparently considering Snap to be a canary in the coal mine for similar ad-based businesses, sold off the stock of peers. They bid down shares of Alphabet’s Google, Facebook, Twitter, and Pinterest by $110 billion in the aftermath of Snap’s filing, which reported revenue coming up short at $1.07 billion versus an expected $1.1 billion for the quarter. Total losses for the ad giants including Snap: $142 billion.

All that pain is Apple’s gain. The iPhone-maker’s new “ad tracking transparency” policy—which potentially reduces rivals’ visibility into certain ad performance metrics (unless companies get explicit user permission for data-sharing)—places competitors at a disadvantage, while giving Apple the upper hand, industry insiders say. Notably, Branch.io, an ad-tech firm, says that 58% of all iPhone app downloads that result from clicking on an ad come from Apple’s own ads, up from 17% a year ago, the Financial Times recently reported.

Apple’s nascent ad business will bring in $5 billion of revenue this year—and balloon to be a $20 billion unit in three years, according Evercore ISI, a firm that advises investment banks, also noted by the FT. When it comes to iOS and the App Store, Apple owns the turf, and that gives it a big home-field advantage.

“Apple’s ad network is not subject to the same data restrictions as others in the latest iOS release, so naturally advertisers would see superior marketing results while spending there. Better looking results leads to more spend,” Alex Austin, Branch.io’s cofounder and CEO, told Fortune. “Ideally, their ad network would be reported in the same way as other networks,” he added.

Apple maintains that its ad-tracking changes are in users’ best interest and protect people’s privacy. “A user’s data belongs to them and they should get to decide whether to share their data and with whom,” an Apple spokesperson told Fortune. The ad policy update gives “users the choice whether or not they want to allow apps to track them.” (For what it’s worth, French regulators took a look and saw no urgent problems with Apple’s ad changes, from an anticompetitive standpoint.)

If Snap is any indicator, Facebook is likely in for more pain when it reports earnings on Monday. Expect the social media giant to blame Apple for any blood.

***

One note from Wednesday’s column about Facebook’s reportedly imminent name change. A helpful reader alerted Data Sheet to a U.S. Supreme Court case that absolved Arthur Andersen, the defunct accountancy, of wrongdoing in relation to alleged data destruction amid fallout from the Enron scandal. The story has been updated to make that clear.

Robert Hackett
@rhhackett
robert.hackett@fortune.com

NEWSWORTHY

When it rains, it pours, huh? Another former Facebook employee has come forward to blow the whistle on the social media giant and its purported prioritization of profits over properly handling misinformation, hate speech, and more, according to The Washington Post. The claims, which the report says echo many of those made by Frances Haugen, were submitted to the Securities and Exchange Commission and come from a former member of Facebook's Integrity team.

Conservatives get loud. New research from Twitter has found that right-wing politicians and content from related news outlets tend to be more often amplified by the social media site’s algorithms than those on the political left, according to Protocol. Why exactly remains undetermined, though, the head of Twitter’s machine learning, ethics, transparency, and accountability team told the tech outlet. “We are not entirely sure why it is happening. To be clear, some of it could be user-driven, people’s actions on the platform, we are not sure what it is. It’s just important that we share this information,” Rumman Chowdhury told Protocol. 

Everyday low prices… on Bitcoin? The largest U.S. retailer is opening the doors for crypto bulls. A new pilot program from Walmart has equipped some of its U.S. stores with Coinstar kiosks that allow shoppers to buy Bitcoin, Bloomberg reported Thursday. And while the Arkansas-based behemoth may not yet be permitting its customers to pay with Litecoin, it is reportedly examining what role crypto will play in its future operations, having posted a job in August for someone to help it create a “digital currency strategy and product roadmap.”

Sexual assault during ride shares persists. A new report from Lyft revealed that more than 4,000 sexual assaults happened during rides originating from its app between 2017 and 2019, though the number of such cases on a per-ride basis did decline in that time period. While the findings only included information about reported cases, they do shed new light on how pervasive such incidents are in the ride-sharing business, which has come under heavy scrutiny in the past for not doing enough to protect passengers and drivers from such assaults. 

A new dodeca-corn. Brex, the quick growing financial technology company, has reached a whopping $12.3 billion valuation after recently conducting $300 million in new funding, TechCrunch reports. The round, which comes just half a year after Brex was valued at $7.4 billion, was led by Greenoaks and includes already existing backers as well. 

FOOD FOR THOUGHT

Less is more. Nowadays, many of us spend much of our time toiling away on social media—fretting over retweets, likes, and follower counts. Well, in the wake of a vicious news cycle about Facebook that has yet again thrust the idea of breaking up big tech back onto the table, The Atlantic is out with a new article Friday that raises the question of why shouldn’t we, the users of said social media apps, just shut up a little bit more often and focus on our most important relationships and those conversations? Efforts from companies to create a social media experience like that (Google+) haven't proven to be all that successful before. But there is decades-old research (that has been refuted by some) indicating that our social lives are pretty much capped at about 150 productive bonds.

From the article:

Online media gives the everyperson access to channels of communication previously reserved for Big Business. Starting with the world wide web in the 1990s and continuing into user-generated content of the aughts and social media of the 2010s, control over public discourse has moved from media organizations, governments, and corporations to average citizens. Finally, people could publish writing, images, videos, and other material without first getting the endorsement of publishers or broadcasters. Ideas spread freely beyond borders.

And we also received a toxic dump of garbage. The ease with which connections can be made—along with the way that, on social media, close friends look the same as acquaintances or even strangers—means any post can successfully appeal to people’s worst fears, transforming ordinary folks into radicals. That’s what YouTube did to the Christchurch shooter, what conspiracy theorists preceding QAnon did to the Pizzagaters, what Trumpists did to the Capitol rioters. And, closer to the ground, it’s how random Facebook messages scam your mother, how ill-thought tweets ruin lives, how social media has made life in general brittle and unforgiving.

It’s long past time to question a fundamental premise of online life: What if people shouldn’t be able to say so much, and to so many, so often?

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BEFORE YOU GO

Can't stop. Won't stop. On Friday, shares of Digital World Acquisition Corp., the blank-check company planning to take former President Donald Trump’s new media and technology venture public, jumped another 107% in trading—extending the SPAC’s weekly gains to 845%. And it wasn’t just DWAC. Phunware, a penny stock company whose technology was used to build Trump’s reelection campaign app, surged more than 470% in trading Friday to a whopping $8.74.

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