Advertisers ‘caught in middle’ of Apple-Meta battle as traffic from Facebook drops

Irish ecommerce businesses that rely on social media to win new customers are seeing less traffic to their sites from the iPhone Facebook app and are paying more to advertise to this audience since Apple's iOS privacy update last year, a new survey has found.

Analysis by marketing company Wolfgang Digital found that traffic to ecommerce sites from the Facebook app on iPhones has dropped 29 per cent since the April 2021 update to Apple's operating system (iOS 14.5) that requires apps to seek user consent to track their activity across other apps and websites.

Almost two-thirds of Irish iPhone users do not consent to apps tracking them, according to research conducted in February by Wolfgang Digital in partnership with iReach.

The survey of 1,000 Irish adults found that 36 per cent were iPhone users and 64 per cent of those did not consent to being tracked. That makes about 23 per cent of Irish adults "untrackable" for Facebook's parent company, Meta, Wolfgang Digital said.

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This has led to greater competition to reach a smaller audience, and consequently sharply higher ad prices. Wolfgang Digital reported a 91 per cent rise in advertisers’ cost-per-click since last April.

"It used to be a lot easier to win clients using social media," said Wolfgang Digital managing director Brendan Almack. "It is now getting a lot more difficult, and people really need to tune in to the activities that are going to give them the edge and even the measurements of what 'good' looks like or what success looks like."

Meta impact

Meta lost more than $230 billion in market value on a single day in February after it reported disappointing fourth-quarter earnings and identified Apple’s iOS data transparency feature as one of the challenges it is facing in the current quarter.

Meta chief financial officer Dave Wehner indicated that the iOS changes, which curbed its ability to offer targeted ad inventory on Facebook and Instagram, would have an impact of about $10 billion on the company in 2022.

Ecommerce companies have been "caught in the middle" of this battle between Meta and Apple, Mr Almack said, with the return on investment from their ad spend down an average of 44 per cent.

Nevertheless, its data set – which represents about 7 per cent of the Irish ecommerce economy – suggests Irish investment in Facebook ads in the second half of 2021 was up 45 per cent year on year.

Businesses will probably continue to invest in Facebook and Instagram ads despite the “eye-watering” decrease in return on investment, Mr Almack said.

“The return has dropped, but it is still a really good return. People are still really benefiting from it,” he said.

“What retailers are probably looking at is just top line. Are we winning more customers? Are we generating more revenue? And if that number is going in the right direction, they will keep investing in the channel mix that they have. When that starts to be an issue, that’s when you will start to see investment move somewhere else.”

Some 2.7 million Irish people are estimated to use Facebook and, despite the shrinking of its worldwide user base reported in February – the first such retreat in its 18-year history – it remains the No 1 social media app in the Irish market.

‘Legitimate challenge’

But Mr Almack said some advertisers may not be able to tolerate the lower return on investment over the longer term and could diversify to other channels. Google-owned YouTube performed well last year, while the ascendant TikTok is on the verge of posing "a legitimate challenge" to Facebook.

With the industry moving away from third-party cookies amid privacy concerns, brands need to concentrate more on building their own first-party data and lessening their reliance on big tech, advises Wolfgang Digital.

“There’s going to be an arms race for first-party data collection between now and the end of cookies,” said Mr Almack. “I think you will see more campaigns geared around not necessarily trying to get you to buy something, but collecting some information from you.”