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Despite the predictions, Apple’s new anti-tracking moves may not crush Facebook’s ad business

When Apple released its new anti-tracking update this week, experts and commentators appeared certain it was terrible news for Facebook. The update asks iPhone owners if they want the apps they use to track them across the web. And given how Facebook’s ad business relies on tracking, this seemed devastating. “It’s certain to hurt,” Politico said. Revenue drops are coming, analysts predicted. Facebook itself disclosed the threat in financial filings.

But whether Apple’s update does much — or any — damage to Facebook’s ad business is far from settled. With third-party tracking limited, advertisers will still need to spend money, and it will be tough for them to disregard Facebook’s 2.7 billion daily users. Apple’s update also makes the data that apps collect on their own properties much more important, and Facebook has plenty of it. So while Apple’s move is a clear win for privacy, it may not be the surefire hit to Facebook many anticipate.

“It's not like a marketer is going to suddenly say, ‘Well, cookies are dead, I guess we'll close up shop,’” Brian Wieser, the global president of business intelligence at GroupM, a major media buying agency, told me. “The least bad alternative is still going to be Google and Facebook, for most.”

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Advertisers typically spend a fixed percentage of their revenue on ads each year, Wieser said. And in deciding where to put their cash, they evaluate all options — TV, print, radio, websites, apps, etc. — and pick that “least bad alternative.” No ad placement is perfect, so they land on what they believe will get them closest to their goals.

If Apple’s update limits third-party tracking across the board — and remember, Android still has 85% market share — then advertisers will inevitably adjust. They’ll put less focus on our behavior online, and more on the core elements of advertising: showing the ad to the target market, doing so multiple times, and at a reasonable price.

“I don’t see how Facebook is the victim in any of the iOS conversations,” one big brand advertiser told me of the changes. “It makes us move away from retargeting and personalization and back to targeting large segments and audiences.” Facebook has a lot of ad space, so it can help advertisers reach those large segments and audiences.

Though Facebook does get a majority of its data from third parties, which Apple targets with this new update, its ad space isn’t going anywhere as long as people keep using its products.

Facebook has also argued that Apple’s changes will hurt small businesses. But the data that Facebook collects on its own apps — information like age, location, and interests — should give small businesses plenty of useful information to work with. So Facebook’s proprietary data could actually help differentiate its ad offering, making its product more useful for small businesses than other online offerings, which Apple’s changes will impact as well.

On Facebook’s earnings call Wednesday, both its COO Sheryl Sandberg and CFO David Wehner said the company is rebuilding its ad tech systems to work as well with less data. For a company so obsessed with tracking, it was wild to hear this was possible. And when I asked why this wasn’t done earlier, a Facebook spokesperson didn’t comment. Nevertheless, if Apple’s update pushes the internet to run effective ads with less data, that’s a good thing for all of us. And perhaps Facebook’s ad business gets by unscathed in the process.

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Further Reading:

Zuckerberg outlines how Facebook will thrive after Apple privacy change (CNBC)

Apple reports another blowout quarter with sales up 54%, authorizes $90 billion in share buybacks (CNBC)

Facebook nearly doubles its profit and revenue rises 48 percent, as tech booms (New York Times)

News Briefs:

What really happened at Basecamp (Platformer)

Basecamp’s decision to outlaw political discussion at work sparked a firestorm this week. It was telling that this happened even though Basecamp employs a fraction of the people it takes to run a Cheesecake Factory. Companies worldwide are trying to figure out how to handle the political discussion flooding their workplace collaboration tools. I know several CEOs who would love to do what Basecamp did this week. So the move set a lot of people off — they saw themselves in the story. That said, bad leadership is too often at the root of these bans (See: Coinbase, Google) and that’s again what happened here. I recommend reading this recap from Casey Newton to see what actually went down.

Breaking Point: How Mark Zuckerberg and Tim Cook Became Foes (New York Times)

The biggest tech feuds are always about ego, and the Apple vs. Facebook battle is no different. In this story, we get an inside look at how Mark Zuckerberg and Tim Cook became rivals. It features anecdotes where Cook essentially tells Zuckerberg to crush his own ad business, and Zuckerberg puts off Apple executives with his self-assured negotiating style. Read this one for some context on a key Big Tech battle that’s only intensifying.

This week on Big Technology Podcast: Doge, Bitcoin, NFTs, and Capital Gains: Ranjan Roy and Can Duruk of Margins Demystify Our Economy

Today's economy is a wild ride, and it's time to demystify it with Ranjan Roy and Can Duruk from Margins. Consider the following: Doge, a joke cryptocurrency, seems to be minting new millionaires daily. NFTs, tokens that enable the buying and selling of digital art, are going for millions. Bitcoin's price is volatile, up $10,000 one week, down by the same amount the next. The overall market, meanwhile, is cranking. In this week's episode, we go deep into what's actually taking place, and discuss whether Joe Biden's proposed capital gains tax increase will bring an end to the party.

To subscribe to the podcast and hear the interview for yourself, you can check it out on Apple, Spotify, or wherever you get your podcasts.

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