Facebook is pivoting to video – short-form, this time.
Woot. All aboard, I guess.
But as Mark Zuckerberg extolled the virtues of Facebook’s TikTok clone, Reels, on the company’s earnings call Wednesday afternoon (apparently it’s the fastest-growing content format in terms of engagement on Instagram), Meta’s share price was experiencing an alarming and precipitous slide.
Facebook’s stock plunged more than 20% in after-hours trading – seriously, it fell off a cliff (see below) – in response to a bleak outlook partially due to Apple-related headwinds and partially a result of slowing growth as engagement shifts to shorter-form formats, like Reels, that monetize more slowly than news feeds.
Apple’s iOS 14 privacy changes alone will likely have a $10 billion overall impact on Facebook’s business this year, said CFO Dave Wehner.
“It’s a pretty significant headwind for our business,” Wehner said.
Handling the headwinds
The question is, what’s Facebook doing to mitigate the impact on targeting accuracy and measurement?
A few things, according to COO Sheryl Sandberg, including working on closing the reporting data gap from missing web-based iOS 14 conversions, with tools like Aggregated Event Measurement that model data to recreate attribution analytics.
But although those efforts should help, “we expect the overall targeting and measurement headwinds to moderately increase from Apple’s changes and from regulatory changes in Q1 and throughout 2022,” Sandberg said.
On top of that, Facebook will face tough comps in the first half of 2022, since the first two quarters of last year were before Apple fully rolled out its AppTrackingTransparency framework.
Even so, it’s only fair to point out that Facebook is still a revenue-generating monster.
Total ad revenue in Q4 was $32.6 billion, up 20% year-over-year, and 2021 also marked the first time Facebook’s business generated more than $100 billion in annual revenue. (It was just shy of $118 billion, for the record.)
But guess who made well over two-and-a-half times that amount in annual revenue, at $257 billion, in 2021? Alphabet, of course.
And Wehner had a thing or two to say about Google’s success, particularly the strength of Google search advertising during the back half of last year.
Although ecommerce is usually strong in Q4, Facebook saw a meaningful slowdown in growth in that vertical due to Apple’s iOS 14 privacy changes – which is “quite notable,” Wehner said, because “Google called out seeing strength in that very same vertical.”
“Those restrictions from Apple are designed in a way that carves out browsers from the tracking prompt Apple requires for apps,” he continued. That means “search ads could have access to far more third-party data for measurement and optimization purposes than app-based platforms like ours.”
To sum it up, “when it comes to using data, you can think of it as … not really apples to apples for us,” he said. (Ha, good one, Wehner.)
“As a result, we believe Google’s search ads business could have benefited relative to services like ours,” Wehner said. “Given that Apple continues to take billions of dollars a year from Google’s search ads, the incentive clearly exists for this policy discrepancy to continue.”
Oh yeah, and Zuck said some stuff about the metaverse. It’s one of Meta’s top seven investment priorities for the year, including Reels, community messaging, commerce, ads, privacy and AI.
But no word yet on whether or when we can expect to get legs.