Shares in Snapchat developer Snap drop after it projects prolonged slump in ad revenues from introduction of Apple’s iPhone privacy tools
Shares in messaging company Snap have plunged after the company said it expected prolonged effects from Apple’s privacy changes on its iOS devices.
The Snapchat developer’s shares traded around 25 percent lower in the US late on Friday following the release of its quarterly financial results, with shares in other advertising-dependent firms such as Alphabet, Facebook and Twitter also down by around 3 to 6 percent.
Apple’s privacy updates, released in June and July, prevent advertisers from tracking iPhone and iPad users without their consent.
They follow the release of iOS 14.5 in April that introduced the App Tracking Transparency (ATT) system.
As a result, advertisers could not measure and manage their ad campaigns for iOS and spent far less on advertising, Snap said.
“While we anticipated some degree of business disruption, the new Apple-provided measurement solution did not scale as we had expected,” the company added.
Apple has provided a proprietary ad-tracking system for iOS called SKAdNetwork, or SKAN, but Snap said measurements from the service were found to “diverge meaningfully” from those of other tools, making it “unreliable as a standalone measurement solution”.
“Advertisers are no longer able to understand the impact of their unique campaigns based on things like the time between viewing an ad and taking an action or the time spent viewing an ad,” Snap said in a statement.
The company said Apple’s changes have “upended many of the industry norms and advertiser behaviors that were built on IDFA, Apple’s unique device identifier for advertising, over the past decade, which now require a double opt-in by users in order to access directly”.
Snap’s remarks, and investors’ reactions to them, are an indication of just how disruptive Apple’s changes are to the digital advertising world, at least in the short term.
Some analysts said the impact of the privacy changes would last until next year as Snap prepares its own ad-tracking tools.
The impact on Snap’s fourth-quarter outlook was “worse than virtually anyone had expected”, said J.P. Morgan analyst Doug Anmuth in a research note.
But he said the effect on Snap was expected to be worse than on Alphabet, Facebook or Twitter, none of which have yet reported September-quarter results.
Snap said the advertising issue was compounded by the macroeconomic effects of the pandemic, with advertisers facing supply-chain interruptions and labour shortages, which has in turn reduced their desire to advertise.
Snap projected fourth-quarter revenues of $1.165bn to $1.205bn, well below analysts’ estimates of $1.36bn. It posted revenues for the third quarter of $1.067 billion (£780m), up 57 percent year-on-year.
Several analysts have speculated that Apple’s privacy system may form the basis for a planned advertising network of its own.