By John Gruber
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Nick Heer, in a tour de force piece at Pixel Envy, “Ad Tech Revenue Statements Indicate Unclear Effects of App Tracking Transparency”:
Does ATT really “[deprive] consumers of widespread ad relevancy and advertisers and publishers of commercial opportunity”? Even if it does — which I doubt — has that commercial opportunity really existed with meaningful consumer awareness and choice? Or is this entire market illegitimate, artificially inflated by our inability to avoid becoming its subjects?
I wonder how much of ad tech’s woes is really ascribable to ATT, and how much is the fault of the myriad other problems it is running into: currency fluctuations, regulation, pandemic effects, and changes in user behaviour all come to mind.
Heer raises too many good points and includes too much research to summarize. Just read it. It’s so thoughtful, and it gets to a point I tried, but I think largely failed, to make on Dithering two weeks ago regarding Facebook’s declining numbers.
To wit, that maybe Facebook’s problem isn’t really ATT, but rather that Facebook’s entire business, from when it first started selling ads through today, has been about offering the hot new thing to the ever-desirable “young demographic”. Let’s call them “20-somethings”, or, if you prefer, “18-to-34-year-olds”. That product, at one point, was Facebook itself — a.k.a. the blue app. If you’re old enough, you will remember that it was, originally, hard to get a Facebook account. It was like an exclusive club. You had to be a student at Harvard. Then you had to be a student at any Ivy League college. Then you just needed a .edu email address. Eventually, of course, you just had to be breathing. But make no mistake, the Facebook of Aaron Sorkin’s 2010 movie The Social Network was the hot new thing for the 20-something demographic.
For the last decade — the 2010s — that hot new thing for the 20-something demographic was Instagram, which Mark Zuckerberg had the remarkable prescience to acquire in 2012 — such early days for Instagram that the acquisition came just weeks after Instagram had launched its Android app.
Now, though, the hot new thing for the 20-something demographic is TikTok. Duct taping TikTok features onto Instagram can’t stem the tide of a generational sea-change like this. Facebook itself remains humongous, and so too will Instagram. They’re not going anywhere. But MTV is still around too. The top-rated cable TV networks in the U.S. are unchanged in decades: Fox News, MSNBC, and CNN.
My theory is that Facebook’s blue app and Instagram are evolving into something akin to those networks in terms of demographic appeal. Stable, huge, but not growing and not for the youth. I could be wrong.1 But I don’t think I am. Internet content networks2 grow until they stop growing, and then they lose their advertising demographic — and investor — appeal.
Heer’s post is replete with data from around the world, with his point being that if iOS App Tracking Transparency were the primary headwind troubling Facebook today, we should see its revenue disproportionately affected in the U.S., where iOS has significantly higher market share than in most of Europe and especially the rest of the world. But that doesn’t seem to be the case. Heer, again:
iOS is far more popular in the U.S. and Canada than it is in Europe, but Meta incurred a greater revenue decline — in absolute terms and, especially, in percentage terms — in Europe.
Meta was still posting year-over-year gains in both those regions until this most recent quarter, even though ATT rolled out over a year ago. [...]
Is it possible the social media giants from California are facing waning relevance? Is ATT perhaps a useful scapegoat with questionable effect? I am not sure it is possible to say from the outside looking in, but I am also not sure we can draw any conclusions from one or two quarters this year, over a year after ATT was launched to the public.
Facebook can’t easily innovate its way out of this dilemma. They have no wand to wave to create the next big thing to usurp TikTok. And they seemingly can’t buy their way out either — TikTok is not for sale, and an acquisition like Instagram almost certainly wouldn’t pass regulatory muster today. (WhatsApp was their last big acquisition, but WhatsApp isn’t a huge revenue generator, and was probably more of a defensive acquisition.)
Hence, I take Zuckerberg at face value that he’s more or less betting the company on “the metaverse”. But to me their efforts on that front feel less like “We know exactly what experiences we’re trying to create that will be more compelling than anything that exists today and will generate explosive decade-long worldwide growth, especially with young people” and more like a “We don’t have any other big ideas” shot in the dark.
In my spitball theory here — which I think Heer shares — App Tracking Transparency is not the cause of Facebook’s troubles, but just an extra kick in the pants as they stumble downhill toward legacy media irrelevance — a decline that was in the making years before “Ask App Not to Track” was in our vernacular.
One contributing factor to Meta’s revenue drop in Europe is currency exchange rates — a problem for every U.S. company doing business globally this year. Perhaps this explains why their revenue drop in Europe is greater, percentage-wise, than in the U.S., despite iOS having far lower market share there. ↩︎︎
A better term, I think, than “social networks”. TikTok seemingly isn’t about being “social” at all — it’s creation and consumption. That’s even more true for YouTube. ↩︎