Linked List: February 3, 2022

Thursday, 3 February 2022

Facebook and Google’s Dependence Upon Advertising ★

Parmy Olson, in an opinion piece for Bloomberg:

But this week marked a troubling difference. Facebook’s announcement that user numbers had dropped for the first time laid bare a long-neglected vulnerability: Digital advertising accounts for 98% of Meta’s revenue, and it also accounts for 81% of Alphabet’s. Of the world’s five biggest tech companies, including Amazon Inc., Apple Inc. and Microsoft Corp., Facebook and Google are the least diversified.

Though conventional wisdom says that conglomerates shouldn’t put all their eggs in one basket, it is hard to knock a business model that has been so successful. After all, people were calling Google a one-trick pony back in the early 2000s because of its bet on ads, and that bet has paid off handsomely two decades later. “Through most of the first decade the concept that Google would make $10 billion was inconceivable to people inside the company,” says Sridhar Ramaswamy, who ran Google’s ad business for about five years until he left in 2018.

It’s a little surprising to me that Google’s ad revenue is down to 81 percent of the company’s total — 10 years ago it was up around 97 percent, like Facebook’s today.

Snap, Facing Same ‘Headwinds’ as Facebook, Reports First-Ever Quarterly Profit ★

Lauren Feiner, CNBC:

Snap reported its first quarterly net profit on Thursday, and beat analyst estimates for the fourth quarter on earnings, revenue and user growth. [...]

Snap has to contend with similar headwinds as Meta, which warned that it anticipates a $10 billion revenue hit in 2022 resulting from Apple’s privacy changes on iOS that make it harder to target consumers with advertiser content.

Snap also distributes its app on Apple iPhones and serves advertising content to monetize its business. But Snap’s direct response advertising businesses experienced a recovery from the iOS changes “quicker than we anticipated,” according to prepared remarks for CFO Derek Anderson for the company’s analyst call.

During the Q&A period, Andersen said that Snap has been mindful to make privacy inherent to its products and as a result, the changes caused by the iOS changes are “likely to be experienced differently for our business than perhaps for others.”

“Others”.

Facebook Accuses Apple of ‘Browser Carve-Out’ on Tracking Prompts, Hoping No One Will Remember That Safari Is Heavily Biased Toward Privacy ★

Michael Simon, writing for Macworld:

Facebook complained that Apple’s app tracking transparency favors companies like Google because ATT “carves out browsers from the tracking prompts Apple requires for apps.” Wehner even went so far as to accuse Apple of ignoring the “policy discrepancy” because “Apple continues to take billions of dollars a year from Google Search ads.”

Glenn Fleishman:

Also amusing of Facebook to whine about a browser “carve out,” when Apple has put more anti-tracking elements into Safari than any other browser and effectively banned third-party cookies.

Exactly: websites you visit on iOS don’t trigger tracking prompts because the anti-tracking features are built in. Apple flat-out removed support for third-party cookies two years ago. When a website tries to set or read a third-party cookie, WebKit doesn’t prompt the user to ask their permission — it just doesn’t work.

Apple has also declined to add new APIs to WebKit that could be misused for fingerprinting, like Bluetooth access and battery stats.

Zuckerberg and the Terrible, Horrible, No Good, Very Bad Day ★

Kevin T. Dugan, writing for New York’s Intelligencer:

At times, an earnings report causes a stock’s price to fall precipitously only for it to moderate in the hour or so after, when the company’s executives calm down Wall Street by saying that all is not so bad. This time, it didn’t work that way. In fact, Facebook’s price continued to slide even lower. Zuckerberg, in his trademark nasal drawl, seemed to acknowledge that the tide was turning against the business he has been running for 18 years as of this week. “The balance of content that people see in feeds is shifted a little bit more towards stuff that isn’t coming from their friends, which they may discuss with their friends, but it’s kind of shifting towards more public content,” he said. The upshot here is that the voyeuristic behaviors that made social media as we know it so profitable — what are my friends talking about? Who did my high school ex marry? — were actually starting to fade.

Here’s a spitball theory: All social networks are fleeting. They’re like hit TV shows — they come and go. Facebook itself (i.e. the blue app) and Instagram aren’t going to disappear, but their times as the new hotness are gone and will never return. (TikTok, which is currently the new hotness, will sooner or later suffer the same fate.)

Zuckerberg Holds Company-Wide Meeting ★

Naomi Nix, reporting for Bloomberg:^*

At a company-wide virtual meeting Thursday, Zuckerberg explained that the historic stock drop was a result of Meta’s weak forecast for revenue in the current quarter, according to a person who attended and was not authorized to speak about it. Zuckerberg echoed his remarks of a day earlier to investors, telling employees that the social networking giant faced an “unprecedented level of competition,” with the rise of TikTok, the short-video platform Facebook doesn’t own.

Zuckerberg appeared red-eyed and wore glasses, the person said. He said he might tear up because he’d scratched his eye — not because of the topics up for discussion.

He should have appeared as a metaverse avatar. There’s no crying in the metaverse.

* You know.

Facebook Stock Tanks, Company Says Apple iOS Privacy Change Will Cost Them $10 Billion This Year ★

Kif Leswing, reporting for CNBC:

Facebook parent Meta said on Wednesday that the privacy change Apple made to its iOS operating system last year will decrease the social media company’s sales this year by about $10 billion. “We believe the impact of iOS overall is a headwind on our business in 2022,” Meta CFO Dave Wehner said on a call with analysts after the company’s fourth-quarter earnings report. “It’s on the order of $10 billion, so it’s a pretty significant headwind for our business.”

Facebook’s admission is the most concrete data point so far on the impact to the advertising industry of Apple’s App Tracking Transparency feature, which reduces targeting capabilities by limiting advertisers from accessing an iPhone user identifier.

Meta shares sank 23% in extended trading on Wednesday after the company warned about numerous challenges and came up short on user numbers. Facebook said first quarter revenue will be $27 billion to $29 billion, while analysts were expecting that number to exceed $30 billion.

Wehner said the $10 billion revenue hit this year is merely a best guess.

Facebook’s stock stayed down all day, wiping $200 billion in value from the company’s market cap — the biggest one-day drop in market value ever. Couldn’t happen to a nicer company.

Worth noting that on Facebook’s analyst call, when pressed on this $10 billion figure, Wehner offered nothing to back it up. Really strong vibes of “The problem isn’t us, or our products — it’s mean old anti-competitive Apple.” It doesn’t seem like anyone bought that line.