Facebook says Apple’s ad changes are hurting its business

Facebook said Wednesday that changes to Apple’s new privacy terms will continue to cause headwinds for its ads business in the third quarter.

Why it matters: Facebook doesn’t typically provide these types of updates outside of earnings calls. The update signals to investors that the company is seeing numbers in the current quarter that reinforce previous warnings about impact from Apple’s changes.

• In a blog post Facebook’s VP of Product Marketing Graham Mudd wrote, “As we noted during our earnings call in July, we expected increased headwinds from platform changes, notably the recent iOS updates, to have a greater impact in the third quarter compared to the second quarter.”

The big picture: The admission is likely to intensify an ongoing spat between Facebook and Apple.

• Facebook has been saying for months that Apple’s tracking changes are not about privacy, but rather a move to assert dominance.
• Apple says it changes aim to improve the experience for consumers.

Details: Facebook also revealed that it had been inadvertently under-reporting web conversions, such as a sale or an app install, which has led advertisers to believe their ads weren't as effective.

• The tech giant said that as a result of the under-reporting, the measurement of their performance was on average 15% worse than it would have been.
• Referring to the company's advertisers, Mudd wrote: "We've heard from many of you that the impact on your advertising investment has been greater than you expected. The cost of achieving your business outcome may have increased and it’s also gotten harder to measure your campaigns on our platform. In some cases, this is due to underreporting on our part."
• ”In some cases, this is due to underreporting on our part. Our estimate is that in aggregate we are underreporting iOS web conversions by approximately 15%; however there is a broad range for individual advertisers. We believe that real world conversions, like sales and app installs, are higher than what is being reported for many advertisers. We are committed to helping you better measure these outcomes and improve your performance.”

Flashback: Facebook said in its second earnings call that it expected Apple’s changes to have a greater impact on its third quarter revenues than its second.

• Apple delayed the rollout of its new app tracking transparency feature, which is why its impact is being felt now.
• Adoption of Apple’s latest software update, iOS 14.5, mostly concluded during month of June.

Between the lines: A Facebook source says advertisers have wanted more clarity from the tech giant about how to handle the changes to ad targeting caused by Apple’s new privacy terms.

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