Opinion: Snap highlights possibility that Apple is causing dreaded “ad-mageddon”

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Snap Inc. sounded the alarm on Thursday for the dreaded Internet advertising slump that could come during the normally busy fourth quarter.

Long feared because since Apple Inc. AAPL,
+ 0.15%
announced upcoming changes to iPhone privacy, many companies with internet advertising business have warned of its potential impact on their bottom line.

Apple updated its mobile operating system in April to give users the option of not sharing or tracking their data, making it harder for software developers to track users in their apps and for them. advertisers to target their advertisements.

Based on Snap SNAP feedback,
-0.71%
Thursday, the results are not pretty. The young social media company, known for its Snapchat app, blamed Apple’s iOS changes as a big factor in its $ 3 million shortfall in the third quarter. In addition, Snap executives forecast fourth-quarter revenue to grow at a rate of only about 19% to only 20%, down from the 57% growth in the third quarter.

Snap shares plunged more than 20% in after-hours trading, taking with it some of the biggest names in tech – Facebook Inc. FB,
+ 0.32%,
Alphabet Inc. GOOG,
+ 0.26%
GOOGL,
+ 0.08%,
Twitter Inc. TWTR,
-0.61%
and Pinterest Inc. PINS,
-2.12%
all of them saw their stocks fall after Snap’s announcement.

Facebook, for example, has been warning of the effects of Apple’s changes for over a year, most recently in September, but investors have yet to see much of a change in Facebook’s highly profitable business model, even in the midst of all the other social controversies. media giant.

Last December, Facebook even launched a full-blown public relations assault on Apple, with full-page ads in three national newspapers, proclaiming that Apple’s upcoming changes would hurt the ability of small businesses to deliver targeted ads to customers. consumers and application developers. possibility of offering free content.

But Snap co-founder and chief executive Evan Spiegel – who had previously avoided targeting specific attacks on Apple regarding the change – said on Thursday that the privacy changes turned out to be more problematic than expected, specifically mentioning that ‘Apple has even changed the tools advertisers have to measure the results of their ads.

Read more: How Apple’s privacy changes will affect more than Facebook.

“I think what we really underestimated were the tooling changes,” said Spiegel. “Advertisers have basically a long history of using a very sophisticated set of tools to measure and optimize their campaigns, which allows them to test out a bunch of different creatives and see what works. “

With Apple’s changes, he said, these tools “have essentially been blinded.”

Still, Spiegel limited his criticism of Apple, adding that these privacy changes were “important to the long-term health of the ecosystem” and something that “we fully support.”

In addition to Apple’s huge changes, the global supply chain and staffing issues are affecting the number of ads businesses start running during the all-important holiday season.

“[Advertisers] don’t necessarily want to speed up the realm of products that they’ll have a hard time getting into the hands of customers, and that’s a bit broad, ”Snap’s chief commercial officer Jeremi Gorman told analysts on the conference call post -Thursday profit.

But Snap executives added, in response to an analyst’s question, that Apple’s changes are having the greatest impact and will affect the wider advertising ecosystem, as some companies have warned it but not. have not yet quantified it.

“So what you see when we go into the fourth quarter is an impact of these issues over a full quarter, into the fourth quarter, and you know the reason we mention, you know, iOS 15 is that this will continue to disrupt the advertising ecosystem, ”said Derek Anderson, Chief Financial Officer of Snap.

Facebook, the parent company of Google, Alphabet and Twitter, will all post earnings next week, and investors will be able to gauge the extent of these problems from their results, advice and comments on corporate conference calls. . If the outlook for the fourth quarter for any of these companies is as bleak as Snap’s, investors are likely to see a huge downdraft in internet advertising companies. On Thursday, many investors were trying to forestall future bad news, which could even potentially impact the mega-merger talks reported between PayPal Holdings Inc. PYPL,
-5.86%
and Pinterest pins,
-2.12%.

If Snap’s warning turns out to be applicable to its rivals, the next few weeks could spell an “advertising hack” for internet stocks and social media companies.


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