Let me start by saying that I don’t like to write about news. I don’t portray my blog as a news outlet and updating my blog with the latest news about social media platforms is not what I am passionate about. I decided to write this post not only because I am asked daily about this topic, but for the first time ever since Facebook Ads became the mainstream advertising platform it is today, we’re witnessing a large-scale battle between Facebook and Apple. And we’re only getting started. For those who are not aware, let’s summarize the dispute in the most simple way possible. Facebook wants to track every step that users make on and off Facebook to better serve their advertisers, which will influence advertisers to spend more money on their platform. Apple on the other hand is working to prevail back users’ sense of privacy on their devices.
This battle has been going on for years as Apple clearly indicated (as it should) that user privacy is a top priority and it will take moderate steps to reinforce it with future software updates. This battle escalated when Apple officially announced it will be rolling out strict privacy updates in Apple’s iOS 14 operating system that would limit the ability of companies like Facebook to gather data about mobile users. To illustrate the amount of concern and stress that Facebook is in, they started advertising in newspaper ads with the following message:
There are two main takeaways to learn from these events. First, anyone who has been advertising on Facebook ads in the last decade can testify that he has never seen anything like this before, it may sound to some that they are in real trouble. Desperate times call for desperate measures. Second, anyone who has been an advertising professional and on a large scale on Facebook Ads knows they could care less about small businesses. Putting the hard-working small businesses as the victims of this war is like saying that equal rights harm minorities or gender equality hinder women. It just doesn’t make sense.
Before going into details, it’s important to understand what Apple is doing. Since pixels evolved (tracking codes placed on websites), companies like Facebook were able to track what you do on and off Facebook. Because you have to be logged in to be on Facebook or Instagram, they didn’t rely on cookies tracking as most websites do, they used human or user tracking. This means that even if you switched between devices (viewed an ad on your phone, and purchased on your laptop) they could still track it. This means that whatever a user does off of Facebook, Facebook could view that information and offer it to other advertisers. For example, if you are browsing for Nike shoes, Facebook could offer Adidas or shoe companies to target you since you’re in the market for new shoes. Like the letter states above, Facebook claims that millions of businesses have profited from personalized ads by having efficient advertising that wouldn’t be possible without these insights and data, but should we take their word for it? Think of the reverse effect of how much competition Facebook can create for your business by showing your customers or website visitors products of your competitors. Just like they show your products to people “in the market”, they will do the same for your competitor. Whoever places the highest bid. Another controversial topic that isn’t giving the proper attention is the fact that Facebook will be losing some of its abilities to attribute views through attribution. If you are not familiar with the term yet, view-through conversions are conversions that a platform attributes (takes credit for) after a user has seen the ad (ad impression) and has made a conversion (purchase, sign up, or whatever the advertiser’s goal is) without clicking on the ad or engaging with it. A click-through conversion (the most accepted form of conversion) is when a user clicks on the ad before he makes the conversion. Apple is taking away some of Facebook’s ability to know when a conversion happened when there was no click on the ad. Shocking right? Think of the implications? Even if 10% of the conversions that Facebook reports comes from view-through conversions (for some businesses it’s a lot more), that’s a 10% drop off the reported revenue on the platform, which the bottom line is that advertisers will see that their ads are producing a lot less revenue. To add more fuel to the fire, Apple is also limiting the number of events that could be tracked based on a 7-day time frame. Prior to this upcoming change, Facebook would attribute a conversion 28 DAYS! After a click or a view. This means that if you’ve seen or clicked on an ad for a product on Facebook and converted within 28 days, Facebook will take credit for that conversion. Think of how many ads you see in your newsfeed in a single day, try to name a few of them just to realize how ridiculous this attribution method is, especially for view-through conversions. Facebook argues that they have conducted statistically significant tests for large advertisers to prove that view through conversion creates an incremental lift in sales and has a lot of value. That’s great and all, but the majority of those 10 million advertisers who advertise on the platform don’t have the resources to conduct statistical significance tests. The majority of them are not even aware of the difference between different attribution models. For the majority of them, it’s all just unexplained or unclear news. Although Apple’s App Tracking Transparency hasn’t yet gone live, Facebook has already accepted the reality and has changed campaigns to attribute conversions based on a 7-day click and a 1-day view. Meaning, that it will only count conversions that either happened when a user made a conversion after 7 days of clicking on the ad or one day of viewing the ad. Once Apple releases the update, Facebook will be limited to a click-through 7-day attribution only with no view-through conversions, which in my opinion is good news for advertisers. In my humble opinion, view-through conversions can make an impact only on a very large scale and harm advertisers by making them spend more of their hard-earned money on ad spend without understanding the true impact. Most advertisers would be better off without view-through conversions and with short-term attributions of a maximum of 7 days. The only one benefiting from these unprecedented attribution claims is platforms like Facebook who have the tracking capabilities to track far back only to make you think that your campaigns are performing better than what they truly are so you can spend more money on the platform.
One argument that I hear about this is that some products that are high ticket items or products that have a longer purchase cycle from the first impression to purchase than 7 days will be impacted by this update. These products or services are high-end products or services that require a longer relationship between the user and business before a transaction happens. My response to this is that if a user hasn’t interacted with an ad and clicked on it a few days prior to making a purchase or a different conversion, the ad shouldn’t get credit for it. Using advanced targeting technologies and abusing users’ privacy only to say, hey this user saw this ad 24 days ago, therefore, we’re taking credit for this conversion is beyond ludicrous in my opinion. In short, Apple is doing the right thing and I hope that Android will take the same route.
Will advertisers and small businesses be the ones paying the price?
The predicted outcome…
Although Facebook warns that small businesses will be the ones paying the price, I have a feeling that Facebook will be the one that will pay the price, and here is why: advertising on Facebook works based on a bidding system. The more advertisers compete for the same ad space, the higher the price of ads. The more positive results Facebook shows them, the more they spend on the platform. With the drop in attribution that is discussed above, advertisers will automatically start pulling back on their ad spend. This will lead to less competition in the Facebook ad auctions that will in return, lower the cost per impressions on the platform. So yes, performance might get a little worse, but that would be correlated to a lower cost to advertise on the platform. Large advertisers will be impacted as well, so it’s something that will happen across the board. In a way, it can be looked at as if advertising will be shifted back a few years, less accurate targeting, and ad delivery, but the cost to advertise will also be lower.
In a perfect world, this sequence of events would lead advertising giants like Facebook to refocus on what makes their advertisers more successful, and not on what brings them only more revenue in the short term. But then again, who in his right mind thinks Facebook is out to do the right thing. Facebook is a corporation and a corporation’s main goal is to make more money for its shareholders. Period.
Apple is doubling down on its commitment to user privacy with their next iOS update and Facebook isn’t happy about it. The new update will restrict Facebook’s ability to track users’ activity off of the app. In turn, Facebook will lose their ability to attribute view-through conversions and will also be forced to reduce their click-through attribution of 28 days to 7 days. This is good news for advertisers who will now more clearly understand the true impact of their ads without Facebook taking credit for conversions that may not have had anything to do with the ad. It’s bad news for Facebook as they will produce lower conversion rates which will likely lead to less ad spend.