The quarterly results for big tech companies are out. Here are some key takeaways for advertisers and marketers.
Microsoft’s fiscal year has been challenging on many fronts. The acquisition of Xandr, the ad-buying platform, and the increase in search volume revenues failed to produce satisfactory results, making Microsoft miss the mark in Q4. With continuous commitments to investing in artificial intelligence technologies, analysts predicted the quarter to be successful for Microsoft. The company attributed stagnant growth to a decline in advertising spending, which was lower than a quarter on quarter.
Its Talent Solutions contributed to the company’s revenue growth exceeding expectations. Despite the increased revenue, Microsoft reported a reduction in numbers due to low ad spending. The tech giant concluded it was due to marketing solutions decline. LinkedIn’s revenue increased due to growth in Talent solutions. Microsoft Cloud showed promising growth in all of its businesses with improvements in its verticals. Search and news advertising went up with the Xandr acquisition.
By the numbers:
- Revenue was up by 8% increasing to $56.2 billion.
- Advertising and news search revenues up to $86 million, a 3% increase including traffic acquisition cost, 8% increase excluding traffic acquisition cost.
- Azure Cloud revenue growth slowed from 27% to 26%.
- LinkedIn revenue increased by 5%.
- Microsoft Cloud’s quarterly revenue was 21% or $30.3 billion YoY.
Currently, the company is prioritizing developing and spearheading safe generative AI models and practices. Their aim is to help customers use Microsoft Cloud to make the most of their digital resources and drive operations control.
Satya Nadella, Chairman and Chief Executive Officer, Microsoft stated in the Q4 results announcement,
We remain focused on leading the new AI platform shift, helping customers use the Microsoft Cloud to get the most value out of their digital spend, and driving operating leverage.
Amy Hood, Executive Vice President and Chief Financial Officer at Microsoft cited,
Advertising spend was slightly lower than anticipated which impacted Search and News advertising and LinkedIn Marketing Solutions. For LinkedIn, we expect revenue growth in the low to mid-single digits.
She further added,
Even with share gains in our hiring business, growth will continue to be impacted by the overall markets for recruiting and advertising, especially in the technology industry where we have significant exposure.
Meta produced results in Q2 that exceeded analysts’ expectations. Revenues from advertising rose robustly. The revenue uptick signaled the social giant’s ad business recovery after previous years of gloom and cross-border concerns. Meta cited the increase in DAUs for Reels, the company’s short-form video content app. This attracts 200 billion people to Facebook and Instagram. The app also generated $10 billion annually, which is a $3 billion increase Q/Q.
The company credits the increase in ad revenues to Threads, the text-based app, and continued investment in artificial intelligence. The company ascribed the increase in ad impressions to a heightened focus on TikTok’s rival Reels and AI-driven products as the key factors in the positive outcome. Meta commits to AI advancements and data centers. The CEO has also highlighted AI as the focal point of Meta’s growth strategy. He predicts revenue from AI-powered structures for marketers, AI chat agents, and productivity tools for employees.
By the numbers:
- Revenue up to $32 billion, up 11%.
- Facebook DAUs are 2.06 billion on average, an increase of 5% year over year.
- Facebook’s MAUs of 3.03 billion increased by 3% year-over-year.
- Family daily active people (DAP) 3.07 billion on average, 7% up Yo-Y.
- Family monthly active people (MAP) 3.88 billion and 6% higher Yo-Y.
- Ad impressions in Q2 2023 increased 34% year-over-year and the average price per ad decreased 16% Yo-Y.
Susan Li, Meta’s Chief Financial Officer however stated that their ongoing commitment to invest in Reality Labs, Meta’s unit for metaverse-related initiatives negatively impacted their results. However, it will not hamper their ambition to spearhead metaverse developments.
Mark Zuckerberg, CEO of Meta added,
We had a good quarter. We continue to see strong engagement across our apps and we have the most exciting roadmap I’ve seen in a while with Llama 2, Threads, Reels, new AI products in pipeline, and the launch of Quest 3 this fall.
Alphabet, Google’s parent company overcame its advertising slump in the Q/Q, signaling a return to momentum with favorable results. The revival of their revenue graph was needed to reshape the competitive AI technology landscape. The Q2 results erased concerns about Google losing digital ad prowess to AI advancements on the financial forefront.
The company attributed the overall growth to increasing Google Cloud Services demand, which is anticipated to adopt AI as it advances. The rise in revenues can be traced to costs from YouTube subscriptions and the Pixel family’s content acquisition. YouTube witnessed a surge in stabilized ad spending despite competition from TikTok. Google Cloud revenues were up due to its AI-optimized structure which piqued consumer interest.
By the numbers:
- Revenue was $74.6 billion, up 7%.
- Ad sales rose 3% to $58.1 billion.
- YouTube revenues increased by 4% to $77 billion driven by brand advertising.
- Network advertising revenues were down 5% at $7.9 billion.
- Google Search and other advertising revenues were up 5%, to $42.6 billion.
- Google Cloud revenues are up 28%, at $23.5 billion.
Alphabet is certain that the money needed to finance AI advancements will come from Google’s advertising engine. As such, Google has predicted that it will face more difficulties not only from rivals like ChatGPT, Microsoft, and Bing but also from Amazon’s shopping unit and TikTok and Reddit in trending topics. As part of its efforts to strengthen cybersecurity capabilities, search, and advertising capabilities, the CEO mentioned that AI would be integrated across its product groups.
Sundar Pichai, CEO, said in the announcement,
There’s exciting momentum across our products and the company, which drove strong results this quarter. Our continued leadership in AI and our excellence in engineering and innovation are driving the next evolution of Search and improving all our services.
CFO Ruth Porat commented,
We expect elevated levels of investment in our technical infrastructure, increasing through 2023 and continuing in 2024. The primary driver is to support AI opportunities across Alphabet, including investments in GPUs and proprietary TPUs, as well as data center capacity. With all that said, we remain committed to durably re-engineering our cost base to help create capacity for these investments in support of long-term, sustainable financial value.
Amazon released its second-quarter earnings, and the numbers were impressive. According to CEO Andy Jassy, Amazon saw developments in areas they had been steadily advancing in for the past quarters. The e-commerce giant attributes its revenue growth to the rise in price points, selections, and convenience available to its consumers. Amazon continues to see strong demand for everyday essentials, positive feedback from customers, and updates to its website, mobile apps, and customizations.
AWS growth stabilized in Q2. Moreover, it continues to grow with customers, partner networks, functionality, and operational presentation. AWS revenues were twice as high as any other provider. Amazon is constantly working to further AWS technologies and features to aid customers in leveraging generative AI, productivity, and security. Ad revenue increased due to performance-based advertising efforts, improved customer relevance of ads, and ML benefits to understand ROI and ad spending for brands.
By the numbers:
- $134.4 billion revenue, an increase of 11% Y-o-Y vs estimates of $131.5 billion by Refinitiv analysts.
- Advertising revenue is up 22% Yo-o-Y, to $10.68 billion.
- AWS sales revenue growth of 12% Yo-Y to $22.1 billion.
- Subscription service revenues including Prime memberships were up 14%, at $9.8 billion.
Amazon is currently working on enhancing Machine Learning models to help marketers access audiences that were difficult to reach with Amazon ads. During an AWS event in New York, Amazon also committed to enhancing generative AI-powered applications with the latest and improved pre-trained large language models (LLMs).
CEO Andy Jassy mentioned in the earnings call,
As the economy has been uncertain over the last year, AWS customers have needed assistance cost optimizing to withstand this challenging time. They have also needed assistance reallocating spending to new initiatives that better drive growth. We’ve proactively helped customers do this.
Apple reported their results for the third quarter that were better than their expectations, however, revenue was down Yo-Y. The company attributed the growth in its revenue to healthy iPhone sales across the world. Apple set an all-time high record for services revenues, including advertising, the app store, and music, exceeding its predictions. The slump in iPad sales revenue was accredited to the iPad Air launch in the prior year. They continue to invest in product enhancements to encourage customer satisfaction which was reported to be 98% across the U.S.
By the numbers:
- Revenue was $81.8 billion, down 1% Yo-Y.
- iPhone revenues are $39.7 down 2% Y-o-Y.
- $6.8 billion, down 7%, for Mac.
- iPad $5.6 billion, down 20%.
- Wearables home, and accessories revenues were $8.3 billion up 2% with expectations.
- Services revenue $21.2 acceleration of 8%.
Apple is releasing its most ambitious and advanced personal electronic device, the Apple Vision Pro early next year for ordinary consumers. It is currently only available to advertisers, content creators, etc for demo purposes and has received stellar reviews.
AI and machine learning will continue to be an integral part of product design. Apple is planning to introduce AI and ML-powered live voicemail in iOS 17. They have also invested in research into generative AI and continue to responsibly enhance their products with these technologies. This is with the goal of enriching people’s lives.
Tim Cook, Apple’s CEO said,
We are happy to report that we had an all-time revenue record in Services during the June quarter, driven by over 1 billion paid subscriptions, and we saw continued strength in emerging markets thanks to robust sales of iPhone. From education to the environment, we are continuing to advance our values, while championing innovation that enriches the lives of our customers and leaves the world better than we found it.
Luca Maestri, Apple’s CFO, further remarked,
Our June quarter year-over-year business performance improved from the March quarter, and our installed base of active devices reached an all-time high in every geographic segment.
Snapchat reported its quarterly results and they were mixed. Although revenue was up Q/Q, it still saw a Yo-Y dip. Just like its competitors, Snapchat is grappling with a slump in advertising revenues. Snapchat also introduced an exciting and innovative AI feature a few months back to keep the platform happening and engaged. My AI, Snapchat’s AI chatbot is now integrated into group chats, recommendations, and ‘Lens’ suggestions.
By the numbers:
- Revenue was $1,068 million compared to $1,111 million the previous year
- DAUs 397 million, an increase of 50 million or 14% Yo-Y
- 4 million global users for paid subscriptions introduced in the previous year
This quarter, the social media company pledged to improve advertisers’ expectations through machine learning technology. It will do so to upgrade its framework, find creative approaches to measuring and optimizing ad spending, and encourage new leadership. Its continuous investment in ML infrastructure has improved company ranking and content personalization.
Snapchat believes that it will face healthy community growth in the next quarter with expected DAU increases of 405 to 406 million.
Evan Spiegel, Snapchat’s CEO said,
We are excited by the progress we have made delivering increased return on investment for our advertising partners, growing our community to 397 million daily active users, and reaching more than 4 million Snapchat+ subscribers.
Omnicom Media Group
Omnicom Media Group ended its second quarter of 2023 on a high note. The organic growth rate was up 3.4% compared to the previous quarter’s results, placing it within its projected range. Omnicom spearheads generative AI developments in the media business. Their ongoing strategic alliances with companies like Adobe, AWS (Amazon Web Services), and Microsoft help them do this.
The business has also promised to invest in media sales capabilities, environmentally friendly technology, and data from first parties. They are currently realigning their staff to match strategy choices and outlook.
By the numbers:
- 3.4% organic revenue growth in Q2 23, with $3,609.9 million revenue
- Advertising Media revenue growth was 4.2%, while organic growth grew by 5.1%
- Third-party costs which include supplier costs the company incurs when providing services to clients increased to $86.8 million
- Organic growth rate for Public Relations was up 0.1%, while execution & support decreased by 3.8%
John Wren, Chairman and CEO of Omnicom said in the announcement,
While the balance of the year will continue to see economic uncertainty, we are entering a dynamic and exciting new era for our company. Omnicom has secure leading positions in generative AI technologies and partnerships to deliver on our promise to achieve the best outcome for our clients and increase the operational efficiency of our company.
EBay has exceeded Wall Street’s expectations in all key metrics and delivered positive results. However, the marketplace’s weakened momentum among active buyers was worrying. Gross merchandise sales decreased also recorded.
In spite of this, the e-commerce marketplace believes that its increasing focus on AI integration into its platform will drive further user momentum. The company currently prioritizes laying a strong foundation for generative AI tools across the website to aid marketers and product listers.
By the numbers:
- Revenue was up to $2.51 billion, an increase of 5% from the previous year
- Advertising revenues were $367 million, up 33.5% Yo-Y.
- Promoted Listings revenue was up 47%, reporting $341 million
- The active buyer base declined by 4%
In the next five years, eBay plans to implement AI enhancements in every part of its organization. They are constantly integrating generative AI features into their site. They are also working towards reinventing the e-commerce landscape. Its work has already produced stellar results and hopes to deliver long-term results.
Jamie Iannone, CEO said,
The foundational work we’ve accomplished over the past 3 years has set us up for a new phase of innovation. Our teams are focused on thinking bigger and moving faster as we build game-changing features and functionality for customers to keep eBay at the forefront of eCommerce.
Apple is ready to take a big leap into generative AI. The iPhone developer is working to offer artificial intelligence similar to OpenAI’s ChatGPT and Google BARD. The tech giant has designed their own framework named “AJAX”, for creating large language models (LLMs). They are testing their own proprietary chatbot, which some engineers are dubbing as “AppleGPT”. According to Bloomberg’s report, Apple’s shares have surged to a record high of 2%. The company is yet to strategize a clear roadmap to make the innovation accessible to consumers.
Apple is testing "Apple GPT" and developing generative AI tools to catch OpenAI https://t.co/03PiW3707T
— Bloomberg (@business) July 20, 2023
More about “AJAX”
According to Bloomberg, the Ajax framework, which runs on Google Cloud, utilizes Google’s machine learning model, Google JAX. Apple is using Ajax to build LLMs as the basis for their own ChatGPT-like application. A small team of engineers developed the chatbot program the year before as an experiment. Apple, however, has suspended the implementation of generative AI in its products and services due to safety concerns. Despite this, the model has been made available to its staff, albeit access is still restricted.
Apple’s John Giannandrea, Head of Machine Learning and AI, and Craig Federighi, Top software engineering executive are spearheading the latest AI efforts. The automated virtual assistant will shorten messages and respond to data-based queries for which it has been programmed. It is currently employed internally for product prototype creation. According to those involved in the program, the tool functions as a web application and essentially mimics BARD, ChatGPT, and Bing AI.
Apple and AI technology
Apple has so far refrained from mentioning artificial intelligence and avoided entering the field, in contrast to Alphabet and Microsoft. Nevertheless, they have made significant attempts to promote AI in recent months, including addressing any potential drawbacks to the technology. When developing several of its products, such as Apple Photos and on-device texting, Apple has been gradually introducing advanced AI. They even incorporated it in their recently released “Vision Pro”, a mixed-reality headset. As compared to their contemporaries, they continue to fall behind in new technology adoption.
Apple is hardly the only tech firm attempting generative AI. Tech companies including Samsung Electronics Co. are actively researching creating their own ChatGPT-type service in response to growing worries about confidential information leaks from third-party platforms. This is an exciting dawn in artificial intelligence. Consumers wait with bated breath to experience AI innovations and redefined landscape in the near future.
Apple announced a deal with Major League Soccer(MLS) in June to stream all games exclusively via the Apple TV application. While more details are awaited, a new report from Bloomberg indicates that Apple is “building an advertising network for live television” as part of the MLS deal. The iPhone maker is holding discussions with advertising partners and MLS sponsors in advance of the launch next February about airing advertisements during soccer games and related shows.
The tech giant recently struck a 10-year deal worth about $2.5B to air MLS games in a new subscription service, as well as Apple TV+ streaming platform. The company will also stream a portion of games for free to users of the Apple TV app. Bloomberg reports that Apple is planning to run advertising in all three partnership tiers: the dedicated package paid TV+ subscriptions and the free TV app. The move represents an expansion of the company’s early live TV advertising, which is included in Major League Baseball games that already air on TV+.
The Athletic reported last month that Apple made a noteworthy move by making their Apple TV app the only place for fans to watch all Major League Soccer games without restrictions or regional blackouts. Moreover, Apple is also one of the frontrunners for NFL Sunday Ticket rights. If Apple ultimately wins the rights, advertising will play an important role in this package.
Apple has increased its aggressive advertising strategy, putting search advertisements in its maps service, for instance, as early as next year.
Apple, Advertising and Adtech
Apple’s advertising privacy restrictions have shaken the digital advertising sector, including those in iOS 14. But in the interim, Apple’s ad business has expanded significantly. Bloomberg estimates Apple generates roughly $4B in advertising annually, with a goal of increasing that number to double-digit billions.
Apple is actively expanding its advertising presence through new ad placements and technical DSP manager positions. It makes sense, doesn’t it? It is estimated that digital advertising is worth over a hundred billion dollars, with Google dominating this industry for many years. Meanwhile, the purpose of a DSP is to allow third parties to buy advertising and targeting data programmatically. And It’s no secret that data is Apple’s most valuable asset.
Apple’s automatic opt-out of invasive targeting, attribution, and advertising is one of the key reasons why consumers prefer it. The question is whether Apple’s built-in trust will be undermined after hitting native apps in iOS with ads.
With the company’s move to software and ad tech, it will undoubtedly face challenges. Even though Google did not innovate much in terms of technology or placements, it has decades of experience in digital marketing and even delayed the deprecation of cookies. It has a major pie of the market share too.
In light of all this, what does Apple’s advertising future look like? Legal and regulatory work still needs to be accomplished, as well as establishing a robust technology platform. In the shifting landscape of Apple’s business model from hardware to software and advertising, competitors need to step up their game. It’s going to be a healthy competition.
Interesting Read: AdTech Vs MarTech: Let’s Settle This Once For All!
Apple appears to be launching its own demand-side platform, though details are thin. Recent job postings hints that the company is expanding its ad business. An Apple job posting indicated that the company is looking for a product manager with 8 years of experience building a mobile demand-side platform and optimizing mobile campaigns.
Digiday broke the news that hiring in the Ad Platforms division has risen significantly since the beginning of 2022. It also highlighted job listings that state Apple is building “the most privacy-forward, sophisticated demand side platform possible”.
Why a DSP?
For any ad company, DSPs represent their intent. Apple’s decision to make it more difficult for companies to sell ads within its ecosystem has enabled it to grow exponentially.
The DSP is a crucial part of any ad tech stack with the goal of winning more media dollars. Basically, it’s the technology that allows a marketer to automate their advertising. The automation of the process is important because it means marketers scale up campaigns based on performance indicator factors, aided by machine learning. It is important that the platform is well-engineered so that advertisers are satisfied and will spend more on it.
In order to create a good DSP, a significant investment of time and money is required. Times have changed and Apple seems to be changing its position on online advertising. This is settled through a DSP.
Apple has scaled and built its advertising business behind the scenes, leveraging its ecosystem assets and user data, they have created seamless consumer experiences. The next logical step in this evolution is for Apple to build its own DSP. As a result, they will have full control over how and where their data is used, preventing leakage outside of their walled garden.
Apple adds new ad plans
Earlier this month, Apple announced they were adding two new advertising slots to its App Store. In the near future, developers will have the ability to place ads outside of the Search tab and Search results. The new advertising spot will appear alongside editorial content on the ‘Today’ page of the App Store. Another ad placement will appear on product pages under the tab “You May Also Like”.
Will the DSP succeed?
Long-time Apple observers will know Apple’s iAds failure. It was a mobile advertising platform that allowed third-party developers to embed advertisements into their applications directly. But Apple takes another chance at that market, to add to its growing pile of services revenue sources. Introducing new advertising opportunities in the App Store and recruiting a team to build its own DSP.
As DigiDay notes, it remains unclear if the intended DSP is geared toward serving ads solely on Apple’s owned and operated properties, such as the App Store itself or on the millions of iOS apps, or even on third-party properties such as the mobile web.
For industry experts, Apple’s plans to launch a DSP are not particularly surprising especially considering industry trends and its privacy-oriented mission.
Meta airs grievances over Apple’s market power in the mobile app industry To FTIA.
When the Federal Telecommunications and Information Administration (FTIA) asked what technology companies thought about Apple, Meta enthusiastically responded. Apple’s new tracking prompt has cost Meta billions of dollars and made innovation impossibly hard for them. Meta mostly criticizes Apple throughout 19 pages of comments. Meta, which is itself the target of a federal antitrust suit, paints Apple as a behemoth that restricts its ability to expand. Meta wrote in the letter,
Despite having some of the most popular apps in the world, Meta’s ability to innovate on its products and services and even reach its customers is determined, and in some cases, significantly limited, by the most popular mobile operating systems, such as Apple’s iOS.
Meta also made a connection between Apple’s ad business which witnessed explosive growth and its challenges in the same market. Other relatively smaller tech companies (mostly app developers), and the Coalition for App Fairness, a group that represents companies including Epic Games, Match Group, and Spotify, filed a comment to the NTIA that also criticized Apple’s market power. They have called on Congress and the Biden administration to act against the power of dominant app store companies like Apple and Google.
Whether this branch would take action is unclear, but it will be interesting to see what approach they decide to take against a tech company.
Interesting Read: How Will Dubai’s Metaverse Sector Contribute To Its Economy By 2030?
Andrea Coscelli, the CMA’s Chief Executive said,
We’re worried that Google may be using its position in adtech to favor its own services to the detriment of its rivals, of its customers, and ultimately of consumers. Weakening competition in this area could reduce the ad revenues of publishers, who may be forced to compromise the quality of their content to cut costs or put their content behind paywalls. It may also be raising costs for advertisers which are passed on through higher prices for advertised goods and services.
Since the tech giant owns the largest service provider in three key parts of the chain. CMA investigation will examine Google’s dominance in the following parts:
Demand-side platforms (DSP) allow advertisers and media agencies to buy publishers’ available ad space from many sources.
Ad exchanges provide the tech to automate the sale of publishers’ ad inventory via real-time auctions by connecting to multiple DSPs and collecting bids for them.
Publisher ad servers that manage publisher inventory and determine which ad to show based on bids received from exchanges and/or direct deals between publishers and advertisers.
CMA advocates for greater regulatory authority for overseeing anti-competitive behavior from tech giants under the new regulator ‘Digital Markets Unit’. It is expected to be introduced in 2020, with the power to fine tech companies up to 10% of global revenues for breaching new digital rules. However, the government has not given the watchdog the authority to impose such fines.
Andrea Coscelli, the CMA’s Chief Executive-
This would be bad for the millions of people who enjoy access to a wealth of free information online every day. It’s vital that we continue to scrutinize the behavior of the tech firms which loom large over our lives and ensure the best outcomes for people and businesses throughout the UK.
In response, a Google spokesperson said,
We will continue to work with the CMA to answer their questions and share the details on how our systems work.
Interesting Read: AdTech Vs MarTech: Let’s Settle This Once For All!
Apple is said to be discreetly purchasing Google search advertisements for high-value apps on the App Store. Because Apple gets a 15% to 30% share of the app and in-app sales, some developers believe is affecting their revenue.
Apple is “secretly” paying Google advertisements that send consumers to an app’s App Store listing rather than the developer’s website, according to multiple app publishers who spoke to Forbes.
One source told Forbes,
“Apple is trying maximize the money they’re making by driving in-app purchases that people buy through the Apple Store. Apple has figured out that they can make more money off these developers if they push people to the App Store to purchase there versus a web flow.”
Interesting Read: Snapchat Sees a 20% Plummet In Revenue Due To Apple’s Privacy Changes!
Masterclass, HBO, Babble, Tinder, and Bundle are among the applications that have been marketed in Google searches, according to the report. The advertiser isn’t identified in the ads, but they all have essentially similar tracking data, indicating that they’re all purchased by a single business.
It’s worth mentioning that Forbes was unable to confirm that Apple was the buyer of the ad slots. Developers provided such information. It’s most likely due to the fact that the app developers didn’t pay for the advertising and that they all lead to an App Store link.
Snap, the parent company of Snapchat, claimed that recent privacy changes in Apple’s iOS mobile operating system had impacted its company by restricting some advertisers from tracking it. The company stated that while it expected some interruption as a result of the adjustments, the issues for advertising were worse than anticipated.
Snap recorded a stock drop of more than 20% recently, soon after the firm published quarterly results that fell $3 million short of its forecast. Snap’s most recent quarter saw revenue of $1.067 billion, up 57% from the same period the previous year.
According to Snap, advertisers were also hampered in their spending due to the pandemic and supply chain problems.
To accommodate to Apple’s privacy rules, the business said it was developing new technology and measuring solutions for advertising. Snap’s chief executive, Evan Spiegel, gave a statement saying –
“We’re now operating at the scale necessary to navigate significant headwinds, including changes to the iOS platform that impact the way advertising is targeted, measured, and optimized, as well as global supply chain issues and labor shortages impacting our partners.”
A reporting glitch in Facebook’s ad results on Apple iPhones has created trouble for brands. Apple’s new privacy rules are making it difficult for Facebook advertisers to even conduct basic analysis and send faulty data about the campaigns.
There is inaccuracy for a simple study like understanding whether the person who saw the ad and made the purchase is the same or different.
Facebook has been fixing its ad platform ever since Apple started cracking down on tracking on its iPhones. Last week, Apple reported a bug last week where some advertisers received incomplete information that affected in-app installs, also known as conversions. Apparently, Facebook underreported the downloads and how well the ads worked for the marketers that ran on certain iPhones.
Facebook Advertisers & Data Dilemma
As stated to Adage, Jeff Richards, a paid media consultant who manages digital advertising for multiple brands explains the challenge for brands with an example: A brand recorded 20 conversions on their website and they correlated to the Facebook ad campaign.
However, Facebook Ads Manager reported zero conversions. This means no return on its ad dollars which was opposite to the reality. It was clear that consumers were shopping. A complete mismatch of data!
Facebook had earlier informed the marketers that the flaws in data reporting are fixed and advertisers can see high conversion values. A note obtained by Adage said, “We will be expanding modeled reporting for Website Purchases Conversion Value.”
Website Purchases Conversion Value is a system used by Facebook to track the total value of sales on an advertiser’s website after people viewed or clicked on a Facebook ad. This is invaluable data that is being inaccurately reported due to Apple’s privacy changes.
The exact reason Facebook was not able to see all the conversions was because Apple made recent changes to its operating system and implemented new privacy changes which led to less information from devices for developers like Facebook. Facebook’s note further stated,
With this update, statistical modeling will be used to estimate associated values of additional modeled conversions where events cannot be observed directly (for example, where conversion data may be partial or missing due to data transmission limitations)
As a result, you may see an increase in reported conversion values and other associated metrics like [Return on Ad Spend.] This update should help our bidding system learn from more representative data, which should then lead to more efficient performance
What’s The Way Out For Facebook Advertisers?
In order to fix this, Facebook is constantly communicating with the advertisers and helping them navigate through the uncertainty, and working on new ad measurement programs using “privacy-enhancing technologies.” Facebook’s fix of using statistical modeling is a ray of hope for many brands to regain brand visibility.
The measurement data is important for brands as it will help them to decide which campaigns to invest in and which to pause.
This is a highly crucial situation for Facebook and needs to find new ways to measure ads on iPhones as every single conversion matters. At the same time, Apple and Facebook should resolve their business differences for the betterment of all the parties involved.
iOS 15 users must have received prompts from the Apple App Store asking permission to serve ‘Personalized Ads’ which was earlier enabled by default.
So, what does Apple’s Personalized Ads Feature mean?
Personalized ads are Apple’s way to serve relevant ads in the App Store and Apple News based on what you read, search, and purchase on Apple devices.
Apple rolling out the new prompt to ask permission is a big deal but there is a catch.
The company used to earlier collect information by default and users had to navigate multiple levels in the settings to disable it which is contradicting Apple’s privacy-first image. So, users using iOs14 and older versions still have the personalized ads feature enabled by default.
How Does The New Consent Prompt Work?
If you are running the recent iOs15 beta, Apple’s Ad Targeting or Personalized Ads appears as a pop-up notification when you open the App Store. In the pop-up, Apple explains the ads will help you discover relevant apps, products, and services.
With privacy-first priority, Apple required other developers to seek users’ permission from the users with App Tracking Transparency (ATT). Apparently, Apple is now showing that they are also treating itself the same as other developers.
But, Why Make This Move Now?
The fact that it was on by default led to Antitrust scrutiny especially when it has limited third-party ad networks with controversial ATT policy but did not follow a similar system to ask permission for its first-party advertising.
As pointed out by Verge rightly, Apple’s language choice is also worth examining – developers are expected to ask a user for consent to be tracked whereas Apple refers to what it is doing as ‘personalization.’
Apple’s rule for other developers: you have to ask users if they want to be “tracked” for ad targeting
But Apple’s own ad tracking is “personalization,” which sounds much less nefarious https://t.co/hsAQuT8zYb
— Alex Heath (@alexeheath) September 2, 2021
This new change brings Apple’s ad policy in line with what third-party developers were required to as a part of the App Tracking Transparency. This can be viewed as a tiny concession on Apple’s part in response to the current antitrust scrutiny in France. According to the complaint against Apple, the users were “insufficiently informed about the use of processing of its personal data” within its own app for ad targeting.
With this small step of ad-tracking pop-up, Apple is conveying “that they are trying to play fair”.
What Is The Final Score?
For iOS14, no permission is required to run personalized ads.
For iOS 15, Apple plans to make a request.
Other developers will have to take the consent and adhere to the law and Apple platform rules with the only question left, will these multiple consent dialog boxes make the user experience distressing?
A remarkable shift by Facebook is underway as it plans a new privacy-focused revamp of its advertising system. It reveals to place more value on user privacy and less reliance on data collection. The social giant business is known for its ability to track users across the internet and utilize the information for its ad targeting processes. Owing to impending regulation and data collection limitations, it is working to create a system that delivers personalized ads without any individual user’s data. Facebook’s VP of product marketing, Graham Mudd explained,
With Apple and Google continuing to make changes via their browsers and operating systems, and with the changing privacy regulatory landscape, it’s important to acknowledge that digital advertising must evolve to become less reliant on individual third-party data. That’s why we’ve been investing in a multi-year effort to build a portfolio of privacy-enhancing technologies and collaborate with the industry on these and other standards that will support this next era.
The privacy-enhancing technology includes cryptography and statistical techniques that will improve ad measurement while relying less on individual data.
We are optimistic that new privacy-enhancing technologies will prove that personalization remains possible and effective as our industry evolves to become less reliant on individual third-party data. These technologies will help us minimize the amount of personal information we process, while still allowing us to show people relevant ads and measure ad effectiveness for advertisers.
Another key area that the social giant is exploring is ‘on-device learning ’. It is a technology that will process data locally on their device rather than sending individual data to a remote server or cloud to determine the best ads for the user. The results are later sent in an anonymous format to the advertisers. However, Graham Mudd explained the challenge in an interview with The Verge,
I think one of the challenges with on-device learning is that the compute resources required to do it are obviously under the control of the operating systems themselves.
The stakes couldn’t be higher for Facebook to get the systems right. Graham Mudd said that,
We definitely see that personalization will evolve very meaningfully over the course of the next five years. And that invest in Privacy-Focused will benefit all of our customers and enable us to help shape that future state of the ads ecosystem.
Facebook’s major changes come amidst government scrutiny and Apple’s App Tracking Transparency (ATT) update. Furthermore, even Google is exploring an advertising system that is more user-privacy-centric.
Apple’s new prompt to ask for permission to track the users for targeted ads is likely to hurt Facebook’s revenue growth. However, the true impact of prompt is still evolving and the report shows that not many iOS users are opting for app tracking. Therefore, this leads to a broad range of data tools that are required to attribute ad responses. Facebook is developing a new range of options on this front.
Providing more insight the social firm is working on privacy-enhancing technologies (PETs) for ads that will minimize data collection, protect personal information while preserving ad measurements.
So, it is working to explore various ways to implement these approaches to new measurement solutions,
Last year we began testing our Private Lift Measurement solution with select partners, which uses a privacy-enhancing technology called secure multi-party computation. This helps advertisers understand how their campaigns are performing while adding extra layers of privacy to limit the information that can be learned by the advertiser or Facebook. This solution will be broadly available to advertisers next year.
To give you a brief, Secure multi-party computation (MPC) allows two or more organizations to work together while limiting the information that either party can learn. Data is encrypted end-to-end: while in transit, in storage, and in use, ensuring neither party can see the other’s data.
The social giant emphasizes that for these technologies to be successful, they will need industry cooperation.
These technologies will only be successful for people and businesses of all sizes if there is industry collaboration and a shared set of standards. That’s why we are calling on platforms, publishers, developers, and other industry participants to work together — on these technologies and other privacy-focused standards and practices.