Why Facebook is so upset about Apple’s IDFA change: Insiders spill

For the past few weeks, Facebook has been running an advertising campaign protecting personalized ads, arguing that targeted ads are critical to the success of small businesses.

The campaign for the campaign has been an ongoing battle between the social media company and Apple. The battle will focus on a unique device identifier on all iPhones and iPads called the IDFA. Facebook and others that sell mobile ads rely on this ID to help target ads to users and estimate how effective they are.

With the upcoming update to iOS 14, apps that want to use IDFA will have to ask users to opt-in when the app is first launched. If users choose, it will make those ads much lower. Facebook has warned investors that these rapid changes could hurt the advertising industry as soon as this quarter.

But while Facebook has been adamant about how damaging this change will be, competitors like Twitter and Snap have said the change will be good for user privacy and could even benefit it. their businesses. Google, the main advertiser on the web, has almost not announced the changes, while at the same time introducing its own privacy-related changes to their Chrome browser and promise to stop monitoring individual users completely.

CNBC spoke to a handful of former Facebook employees who have worked on the company’s advertising products and businesses and explained why the social media giant is making such a strong case for change. upcoming Apple.

The most important thing involved for Facebook is the so-called view changes. This metric is used by ad-tech companies to measure how many users saw an ad, did not click immediately, but subsequently made a purchase related to that ad.

Think of scene changes like this: You tap through your Instagram stories and see an ad for a pair of jeans. You won’t knock the bottom of the ad for more information because you’re busy checking out what your friends are up to, but the jeans were quiet. A few days later, go on Google, find the jeans you saw on Instagram and buy them.

After making the purchase, the seller registers the IDFA of the customer who purchased the jeans and shares it with Facebook, which can determine if the IDFA matches a user. who saw an ad for the jeans. This shows the seller that their Facebook ad worked.

Losing that kind of measurement could be a huge blow to Facebook. If advertisers can’t properly measure the effectiveness of their Facebook and Instagram ads, they may feel compelled to shift more of their budgets to other apps and services where they can see the real results. invest for their ads.

Facebook is the number two recipient of a dollar online, behind Google. One particular danger is that advertisers are pouring more money into Google ‘s advertising business, which Facebook can’t duplicate, and which is targeting users at the time of conversion.

For specific businesses, the IDFA change in particular will have hurt its Audience Network.

Facebook Audience Network provides ads in non-Facebook apps, and uses IDFA numbers to determine the best ads to show to all users based on Facebook data. For example, a soft drink maker might decide to target 18-to-34-year-old gamers in the San Francisco Bay Area with a new boost. The company could use Facebook Audience network to place these ads in front of the right audience within mobile games; Facebook would share the advertising revenue with the makers of the game.

But if users choose not to track IDFA, all of those personalizations built by Facebook will be rendered irrelevant outside of the company’s own apps. In August, Facebook acknowledged that Apple’s upcoming iOS 14 could lead to a more than 50% drop in its Audience Network advertising business.

Almost all of Facebook’s revenue comes from advertising, but Facebook Audience Network contributes only a small portion of that – far less than 10% of net revenue the company, someone familiar with the numbers told CNBC.

In addition to view changes, Facebook may lose valuable data about what iPhone-based users do on their devices when they are not in Facebook-owned apps. Already, Facebook collects a lot of data about its users from its apps, which include Facebook, Instagram, Messenger, WhatsApp and others, but every piece of data is further makes its algorithms better at what they do, which includes ad targeting.

While Apple allows users to decide if they want to access IDFA search, it also allows app makers and advertisers to collect certain data through their SKAdNetwork API without permission. clear from the user. But the information shared won’t be much less hateful – Facebook has warned in developer documents that it won’t support a breakdown of activity in buckets like area, age, or gender, for example.

Facebook knows it won’t be able to convince Apple to change its mind regarding IDFA, but it has gone ahead with this campaign in support of small businesses anyway. Why?

Reputation repair could be one reason. Facebook’s reputation has been in the gutter since the Cambridge Analytica scandal in March 2018, in which a data company unduly accessed the data of 87 million Facebook users and used it to target ads for Donald Trump in 2016 presidential election.

Since then, Facebook has received a number of scandals, has lobbied Democrats and Republicans and has fought relentlessly against misinformation on its services.

Taking the moral high ground and saying it stands up for small businesses, the IDFA debate allows Facebook to rebuild goodwill, even if with only a fraction of the population, said one former employee on Facebook.

Plus, IDFA tracking doesn’t go away – users just have to give it permission. This means that Facebook and other app developers will have the opportunity to send their case to all Apple users.

A Facebook marketing campaign is a key part of his case. The company wants consumers to combine device tracking with personalized ads and by supporting small businesses. “Don’t sign up for Facebook, do it for the coffee shop you care about,” is the heart of the message.

Within a small subset of its users, Facebook has begun to feature suggestions asking them to opt-in to IDFA search. This is what is known as A / B testing. Among technical firms, A / B testing is a popular strategy for determining the most effective way to do something. In this case, Facebook may show different recommendations to different users to find out what is the best incentive to convince most people to opt-in. enter your IDFA search.

When asked if IDFA change will really affect small businesses as Facebook says it will, the former employees gave mixed answers.

With less tracking data available, Facebook and all of its clients, including small businesses, will not be able to target ads as effectively as they once did. So in that sense, yes, small businesses will be affected.

However, for many small businesses, the change may not be obvious at all.

If you’re a small coffee shop in Austin, Texas, for example, you may not need too much data to target your ads, said Henry Love, who was an employee of Facebook’s small business team. Such a business typically limits its targeting to very broad categories – for example, an age range and distance range from a specific zip code would allow them to target ads to nearby Facebook users. That’s the kind of data Facebook would be able to collect from its own apps, without the need for an IDFA to track user activity elsewhere on their Apple devices.

“If you talked to a restaurant owner anywhere and asked them what IDFA is, I don’t think any of them would know what it is,” Love said. “It’s influencing Facebook at scale. Not the owners of the small businesses.”

A few “small business owners” who may be feeling the effects of the IDFA change include start-ups backed by venture capital funding that have hired professionals with the skills to target consumers with sniper precision , said Love.

“The same people who are targeting across Mobile Audience Network, web and Facebook, they are not small businesses at all,” he said. “They’re fast, backed by a VC. It’s not your normal SMB.”

Moreover, while the change doesn’t have a slate until early spring, Facebook has known about it for a long time, and has been releasing several other solutions to businesses.

Notably, the social media company in 2020 introduced Facebook Stores and Instagram Stores. These features make it possible for brands to list their product catalogs directly on Facebook’s most popular apps, and sell products directly on Facebook and Instagram. If sales happen within the walls of Facebook, IDFA tracking will not be required.

You may have already sold several brands directly on Facebook and Instagram. Expect to see more move forward.

Megan Graham contributed to this report.