Here’s something for an investor to report on Facebook’s next earnings call Wednesday: Apple’s upcoming IDFA changes could significantly impact Facebook’s revenue, up to 7% of total revenue in Q2.
This is according to Eric Seufert, mobile consultant and investor and editor of Mobile Dev Memo.
Doing a little math on the napkin, 7% could translate into about $ 5 billion, depending on what Facebook reports in its future quarter.
Regardless of the specific number, however, “it’s definitely material,” said Seufert, who recently devised a new formula to gauge how much Apple’s move, which will take effect in the coming weeks or months, will achieve Facebook’s results.
It’s more complicated than it looks.
Although Facebook has denounced the negative effect an IDFA participation requirement will have on developers’ ability to monetize – and constantly refers to potential “targeting headwinds” when reporting its quarterly results – Facebook hasn’t publicly shared any. precise number on the possible revenue impact of Apple’s move.
To put a number, Seufert looked at four different components: the percentage of revenue Facebook gets from mobile devices, a rough percentage of revenue it gets from iOS devices, a projection of the activation rate for the AppTrackingTransparency prompt, and an estimate of how much Facebook advertising and targeting efficiency will be compromised without prompt access to the IDFA.
For the attendance rate, which can only be guessed until Apple’s changes actually take effect, Seufert used the Bumble dating app as a benchmark. Bumble, which is often one of the top 10 grossing App Store apps in the US, noted in its recently unveiled S-1 that it expects between 0 and 20% of people to grant access to the IDFA.
“Bumble is a well-established and popular app that people inherently provide a lot of data to anyway – it’s a dating app – and they also expect a very low attendance rate,” Seufert said.
It’s even more difficult to determine how much Facebook ad efficiency will decrease.
For this, Seufert extrapolated based on Facebook’s comment in June that CPMs on Audience Network would have dropped by 50% without the ability to run personalized advertising.
“Basically, Facebook is saying that if the data connection is cut between Audience Network and Facebook’s central servers, where they have all of their profiles, then there is no way to match people and CPMs are cut in half,” Seufert said. .
And that’s a pretty decent proxy for the effect the deprecation of IDFA is likely to have on the Facebook family of apps.
Because if Facebook could have easily used their proprietary data to boost ad targeting, it wouldn’t have stopped meeting the demand for the mobile web in Audience Network after it became clear that third-party cookies were on Deathwatch. And it wouldn’t sound the alarm bell about the loss of IDFA, because it wouldn’t be needed.
But this is clearly not the case.
The future of Facebook
A 7% decline in revenue in Q2 is just the baseline scenario based on Seufert’s modeling. At best, Facebook will only take a roughly 2% cut in the second quarter. At worst, however, success could reach 13% or more of revenue.
And so there’s no doubt that Facebook is planning the worst. If Facebook wasn’t worried – or at least didn’t want to mitigate the expectations of developers and investors – it wouldn’t be as explicit as it has been about the likely aftershocks of the upcoming IDFA change.
(Google, on the other hand, just peeked at the subject, though that doesn’t mean they aren’t or shouldn’t be interested. While Google has access to many search signals, its App Campaigns product in particular is “heavily exposed. “, Seufert said.)
After a big gouging in the second quarter, Seufert expects Facebook’s outlook to improve during 2021 to decrease revenue by just under 4% by the first quarter of 2022. That’s only if it can mitigate its revenue loss. in the third and fourth quarter through IRL experience with SKAdNetwork and greater investments in the contextual.
“The question will be how much will they improve in contextual targeting over that period,” Seufert said. “They probably have an army of data scientists involved in contextual optimization problems right now.”
By zooming out, Facebook is also making bigger moves to accelerate its strategy of bending user interactions deeper into its apps, including Instant Games, Facebook Watch, Facebook Shop, and Instagram Shopping, Seufert said.
“This is all part of a tectonic shift that is happening in the background, and the [CPM] piece of price recovery is part of that, “he said.” Facebook will lose less efficiency if it can use more first-party data. “
- According to this source Facebook could receive multibillion-dollar revenue from Apple’s IDFA changes
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