Facebook ad business hit by new Apple privacy rules

Company's stock dropped more than 4% to close at $343.2 a share on Wednesday

Facebook's net profit surged to $10.4 billion in the three months to June 30, almost 9.4 per cent up on a quarterly basis. AFP

Facebook has told advertisers that Apple's iPhone privacy changes, which allow users to block tracking, have significantly affected its advertising revenues because less data could be collected.

“The cost of achieving your business outcome may have increased and it’s also gotten harder to measure your campaigns on our platform. In some cases, this is due to underreporting on our part,” Facebook’s Vice President of Product Marketing Graham Mudd said in a blog post.

“We believe that real world conversions, like sales and app installs, are higher than what is being reported for many advertisers."

Facebook’s stock dropped more than 4 per cent.

Apple’s latest update to its operating system is intended to make it harder for advertisers to track people as they rotate between different apps on their device.

People will be given the option to opt in or out of app tracking. This will restrict how technology companies such as Facebook and Google gather data for advertising purposes.

Facebook said the iOS privacy changes will also adversely affect its earnings in the third quarter ending on September 30.

“We expected increased headwinds from platform changes, notably the recent iOS updates, to have a greater impact in the third quarter compared to the second quarter. We know many of you are experiencing this greater impact as we are,” said Mr Mudd.

In the company’s July earnings call, Facebook’s chief financial officer David Wehner also warned of the potential negative impacts of the iOS privacy changes.

Facebook's net profit surged to $10.4 billion in the three months to June 30, almost 9.4 per cent up on a quarterly basis. Revenue during the period rose 56 per cent to more than $29bn

The social media giant also recommended a series of measures for advertisers to better analyse their ad performance.

“Consider waiting a minimum of 72 hours or the full length of the optimisation window selected before evaluating performance for conversion-optimised campaigns. Daily assessment is still possible for campaigns but waiting will ensure you get the most accurate picture of performance,” said Mr Mudd.

Facebook said it will introduce new tools to help advertisers with “delivery effectiveness and measurement”.