Apple’s changes make it difficult for Facebook and online sellers

For every $27 ad on Facebook and Instagram, the tea brand Plum Deluxe earned one customer, but then Apple introduced a change in privacy, restricting user tracking on mobile devices.

Currently, the company has to spend about $ 270 to find a new buyer. That’s a significant increase that Plum Deluxe can’t afford, according to founder Andy Hayes.

Apple’s move is starting to show its impact on the online advertising market, affecting e-commerce players and challenging technology firms like Facebook and Snap. On October 21, Snap cited Apple’s change as one of the possible reasons for slowing growth this quarter.

Apple requires apps to ask permission from users if they want to track them. Many people chose not to agree. As a result, programs like Facebook and Snap capture less data about users’ habits and preferences and can’t target ads as effectively as they used to.

It’s harder for advertisers to reach potential customers, while advertising prices go up because of Apple. MuteSix, a digital agency that specializes in working with online brands, says its clients see an average 25% increase in Facebook ad prices.

Facebook has warned that the change could negatively affect business results. A wide range of small online businesses, from clothing retailers to office furniture suppliers, rely on Facebook and Instagram to expand their audience.

Many companies struggled to cope with the new situation and had to reduce advertising budgets. According to Nii Ahene, Chief Strategy Officer of digital advertising agency Tinuiti, small businesses can open a website to sell clothes and then advertise on Facebook because Facebook can identify the most potential buyers by their activity on the web. . However, that has become much more difficult for Facebook.

Facebook will report business results early next week. The advertising business brought in $84 billion for the company in 2020 and has remained stable for the past 18 months despite boycotts from brands and the epidemic. A Facebook spokesperson said that Apple’s changes only benefit the advertising business of “defective apples”. In contrast, an Apple spokesperson said the change is intended to give users the power to decide whether and with whom to share data. The new rule applies to all developers, including Apple.

According to mobile app analytics firm Flurry, US users only consent to tracking in 16% of them seeing Apple notifications.

Pregnancy and fertility testing startup Get Stix has spent between $50,000 and $100,000 on Facebook ads per month since the beginning of this year. However, the cost of finding customers has increased 3 times. Because they didn’t have enough money to resist, they cut their Facebook advertising budget in half and switched to other types of advertising. The startup also increases creativity in advertising to get points from Facebook’s algorithm.

The increase in ad prices is because of an old trick of Facebook. Facebook Targeting Ads relies heavily on a piece of code called a pixel, embedded in over 8 million websites. When someone visits a website, the pixel collects that person’s information and sends it back to Facebook. If a user chooses not to be tracked, the information will not be sent to Facebook. The number of potential users decreases, inversely proportional to the advertising price. Facebook can still target users with previously collected data, but that data will quickly lose value.

Another effect of the privacy change is that it’s harder for Facebook to give advertisers insights into ad performance. It is very difficult for Facebook to “receive credit” if users spend. As a result, more and more businesses are lowering their Facebook ad spend.

According to WSJ