For months, Apple and Facebook waged a PR war (with threats of a legal one) over App Tracking Transparency, a change in recent versions of the iPhone's iOS software that will often limit how advertising-focused apps and companies can monetize iPhone users.
Facebook's original public predictions about App Tracking Transparency's effect were apocalyptic. But even though App Tracking Transparency took effect during Facebook's most recent quarter (Q2 of 2021), the company still posted huge ad revenue growth.
Facebook's revenue, which is largely driven by the kinds of advertising that Apple's iOS change undermines, grew 56 percent year-over-year in Q2, beating investor expectations. The company had 1.9 billion daily active users and 2.9 billion monthly active users. It earned $10.12 of revenue per user, on average.
This was the first earnings report Facebook has delivered for a quarter that should show any effects of App Tracking Transparency on the company's bottom line. Fifty-six percent year-over-year growth certainly doesn't look apocalyptic, but CFO David Wehner told investors to expect a less rosy story in the next quarter:
We continue to expect increased ad targeting headwinds in 2021 from regulatory and platform changes, notably the recent iOS updates, which we expect to have a greater impact in the third quarter compared to the second quarter.
Data on user opt-in rates for tracking has varied quite a bit. Some firms put the figure at just 4 percent, but others place opt-in rates as high as around 30 percent. The rate likely depends on the app in question. In any case, users who opt in are definitely not the majority; most users are declining to be tracked when prompted. And each user who does is worth a lot less money to Facebook, which makes much of its money leveraging each user's data to charge advertisers money to microtarget users and others with similar attributes.
While Facebook's initial messaging around App Tracking Transparency was combative, Zuckerberg has changed his tune recently. He began to argue that the change could even be good for Facebook in some ways.
Today, Zuckerberg is dedicating much of his time to describing his vision for the "metaverse," which he has identified as the new direction for the company. He has described this vision as putting a mixed-reality layer on our lives through which people can interact and socialize with one another virtually in new ways while crossing geographic barriers.But Apple executives have also outlined a somewhat similar long-term vision, albeit with a very different approach. By forcing Facebook to play by different ad-targeting rules, Apple has strengthened its position against the social media company in any coming battle over a future mixed-reality computing landscape.
But at least for this quarter, Facebook does not seem to be suffering too badly from the recent iOS change.
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