Apple's Privacy Rules to Blame for Facebook's Lower Than Expected Quarterly Growth, Says Zuckerberg

Facebook CEO Mark Zuckerberg stated that Apple's privacy regulations "negatively affect" Facebook and its business during the most recent earnings call.

Apple's iOS 14.5 and later versions of iOS and iPadOS require that apps ask users permission to track them on other websites and apps. The App Tracking Transparency framework (ATT) allows users to choose whether or not they want to be tracked for advertising purposes.

Facebook voiced its displeasure at the new policy change in the weeks before it was launched. It explicitly described the change as detrimental to small businesses that use its platform for targeting customers. Facebook and other ad service providers may have less data to allow targeted advertising, as one example from Facebook suggests. This makes it more difficult for local businesses to advertise to customers near them.

Facebook CEO Mark Zuckerberg continued his anti-Apple privacy rules campaign and blamed Apple for the company's slower than expected growth in its third quarter. Zuckerberg opened the earnings call by stating that Apple "negatively affects" Facebook, but that he believes that the company can "navigate" the problems Apple presents because of its long-term investments.

We experienced revenue headwinds as expected. This quarter included Apple's changes. These changes are not only affecting our business but also millions of small businesses, which is already in a challenging time in the economy. Dave and Sheryl will discuss this further later. But the bottom line is that we believe we can navigate these headwinds over the long-term with investments we already make today.

Zuckerberg and the Facebook executive staff hold Apple's changes responsible for this quarter's performance. However, it could also be an asset. Zuckerberg stated in the past that ATT could eventually help Facebook. This sentiment was repeated again during the earnings call.

Zuckerberg claims that Apple's changes have made "e-commerce and customer acquisition on the internet less effective." Zuckerberg said that Facebook may still benefit from this decreased effectiveness, as "solutions that enable businesses to set up shop directly within our apps will be increasingly attractive."

Sheryl Sandberg (Facebook's chief operating office) also criticised Apple and its privacy rules. She claimed that the new rules were detrimental to Facebook, while Apple's advertising business benefits.

We have been open about the fact there were headwinds and we've seen them in Q3. The most significant is the impact of Apple’s iOS14 changes. These have created headwinds in other industries, major challenges for small business, and benefited Apple's advertising business.

Facebook was under a lot of scrutiny due to leaked documents and scrutiny. Sandberg blamed Apple for the poor performance this quarter. Sandberg stated that "Overall, if not for Apple's iOS 14 updates, we would have experienced positive quarter-overquarter revenue growth."

A leaked document from an internal archive indicates that Facebook is becoming more concerned about its youth audience. According to company documents, Facebook is looking to make its platform more appealing to younger users. This is a segment of the online audience that is becoming less interested in Facebook.

Facebook's iMessage platform is one area where it hopes to appeal to younger users. During the earnings call, Zuckerberg stated that iMessage was "growing in popularity," possibly posing a threat to Messenger and other messaging platforms like Facebook.

Apple has repeatedly defended App Tracking Transparency. It claimed that it wants users to have the option of being tracked or not. Apple posted a YouTube video following ATT's launch stating that some apps have trackers embedded that take more data than they require. It is shared with data brokers and advertisers. This is happening without your permission. Your data is available for sale. You are now the product.

Tim Cook, Apple's chief executive, has spoken out about Facebook before. Cook said that platforms like Facebook can lead to violence and polarization in a speech he gave at a privacy conference earlier this year. Cook stated that if a company is built on misleading users, data exploitation and choices that are not available to all, it should not be praised. It deserves reform," Cook said.


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