Apple's Privacy Turn that Changed Everything for Facebook and Shopify | Business News | Important

For decades, companies have been collecting and sharing data in order to better understand users and serve up targeted advertising. Of course, in recent years, many companies have offered users ways in which they can opt-out of such data harvesting. However, these were typically well concealed. Apple itself has given users the option to disable its tracking feature, the ‘Identifier for Advertisers’ or IDFA, since 2012. What makes this new policy important is that, instead of letting users turn off the feature, every app has to explicitly ask for it to be turned on.

The changes made by Apple severed an important link in the Facebook advertising model. Facebook was previously able to track users that saw a particular advertisement and converted to a sale or subscription on an outside site using identifiers provided by their phone (IDFA on iOS). This data helped advertisers to refine their advertising by comparing what worked and what didn’t, and helped Facebook continuously improve their advertising’s effectiveness by seeing the way certain types of customers behave.

Well those changes have certainly hurt Facebook. The company announced last month that it would cost the company approximately $10 billion in revenues for 2022. That loss will likely come through lower pricing, which means lower margins, which means low net income. In short…it’s pretty bad for Facebook and the market has responded, with the stock down nearly 50% from its highs in August.

Shopify is the largest e-commerce platform for SMBs — with over a million subscribers. Shopify’s success is tied to its subscribers’ success, and if SMBs are losing revenue, that’s going to impact Shopify. The market seems to think so as well, and Shopify’s stock price has followed Facebook’s downward trend.

To be clear, I don’t believe that all of Shopify’s issues are related to Apple’s changes. The company was a real pandemic darling that followed other e-commerce companies’ dramatic rise in 2020, only to come crashing back to earth as economies reopened. Another factor to consider is their investments in their fulfillment network, which costs a lot of money and changes the company from an asset-light software provider to a capital-intensive hybrid of software and services. Investors may not want to pay the same multiples for the latter, but that’s a short-term mentality. In the long run, I believe those investments will pay long-term dividends.

However, the problem SMBs face doesn’t seem to be going away anytime soon and it’s predicted it will take Facebook several years to get back to the level of targeting it was able to previously achieve.

So what can Shopify do in the meantime to help their customers, particularly as economic uncertainty will hit SMBs harder than larger companies?


#ios14update #facebookads #applesprivacypolicy


Edited by Ankit