Loose-leaf tea seller Plum Deluxe was getting new customers for every $27 they spent on Facebook and Instagram ads. then apple Ltd.
Currently, the company is spending up to $270 to acquire new customers. “It’s a huge leap forward and we can’t absorb it,” said Andy Hayes, founder of Plum Deluxe in Portland, Oregon, which is currently cutting spending.
Apple’s changes, revealed in April, are beginning to disrupt the online advertising market, hurting e-commerce players and creating challenges for tech companies, including Facebook. Ltd.
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and snap Ltd.
Snap cited Apple’s changes as one of the reasons it expected growth to slow this quarter. Snap shares fell 20% in after-hours trading after making their disclosure in the earnings report.
Apple’s new policy requires apps to ask users if they want tracking. Many users have opted out of tracking with popular apps like Facebook and Snapchat. As a result, these apps do not get much data about consumer habits and interests and cannot effectively target ads to users.
According to executives, advertisers have difficulty reaching potential customers, and Apple’s changes have further increased advertising prices, which had already gone up. Mutsix, a digital agency affiliated with a direct-to-consumer online brand, says customers are seeing an average increase of about 25% in Facebook ad prices.
Facebook, which has openly opposed Apple’s changes, warned that the changes could adversely affect the company’s performance. From clothing retailers to office furniture suppliers to protein powder distributors, a variety of small online businesses rely heavily on Facebook and Instagram ads to reach new customers.
According to interviews with 20 e-commerce and advertising industry executives, many of these companies are struggling to keep up with Apple’s changes, and some say they are cutting advertising costs.
Nii Ahene, chief strategy officer at digital advertising company Tinuity, said: “It’s very difficult” for Facebook to do that, he said.
Facebook presented its quarterly results on Monday. The company’s advertising business, which generated $84 billion in revenue last year, has been resilient with advertisers boycotts and the pandemic for the past 18 months, and Facebook can successfully deal with Apple’s changes.
A Facebook spokeswoman said Apple’s changes would benefit its growing advertising business. “Apple’s policy is benefiting their bottom line at the expense of companies that rely on personalized advertising to reach their customers and grow their business,” a spokesperson said.
An Apple spokesperson said the change was intended to allow users to decide whether to share their data and with whom. “These rules apply equally to all developers, including Apple, and we have strong support from regulators and privacy advocates for this new feature,” a spokesperson said.
According to mobile app analytics provider Flurry, only 16% of US users choose to track privacy signals from Apple.
GetStix Inc., a pregnancy and childbirth testing startup operating as Stix, spent $50,000 to $100,000 a month on Facebook ads earlier this year. The company observed that as the digital advertising market boomed and Apple began to change, the cost of acquiring customers would triple.
Getsticks co-founder Cynthia Plott said: “We need to pull back.” Sticks nearly halved Facebook’s advertising spend and shifted dollars to other types of advertising, from TikTok to email marketing.
Sticks is starting to spend more on Facebook and will be boosted by Facebook’s algorithms as it is able to reduce advertising costs by improving the creative content of its ads.
The increase in advertising prices is due to the traditional shortage of supply. Facebook’s ad targeting depends partly on code called pixels, embedded in more than 8 million websites. When someone visits the site, Pixel collects your information and sends it back to Facebook. For Apple users who opt out of tracking, that information will not be sent to Facebook. This reduces the number of potential users an advertiser can target and raises prices.
GetSmirk creative director Joseph Kent sells whitening products online and spends about $2,000 a day on Facebook ads. Get Smirk.com is a UK based company that operates Facebook Ads. The price has risen by about 45 per cent since April. .. The company has shifted part of its advertising budget to email marketing.
Office Furniture Manufacturer Steelcase Ltd.
Use Facebook’s pixel to track when users visit your company’s site, target them on Facebook, and drive them back to your site. This method is not possible if the user has opted out of tracking.
“The smaller the pool of users, the higher the cost of reaching them,” said Rob Poel, general manager of Steelcase’s telecommunications division. Steelcase confirms that Facebook advertising cost-per-click has increased by 90% over the past six months, partly due to changes in Apple’s privacy.
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Paul said that the company’s revenue from Facebook has also been halved. Steelcase’s response was to spend more on Facebook to increase revenue, he said.
If a user opts out of tracking, Facebook may continue to target that user with the data they collect prior to opting out. But that data quickly loses value, said digital advertising consultant Eric Schefeld.
Another effect of Apple’s changes is that it is becoming increasingly difficult for Facebook to provide advertisers with more information about the effectiveness of their ads. Josh Henry-Hicks, vice president of paid social at MuteSix, said it’s hard to accept that Facebook has driven users to buy.
Sports nutrition company Eth Sport said it has cut advertising costs on Facebook. “The biggest thing is that you can’t attribute your sales to Facebook,” said company owner and founder Stuart Kam.
Facebook, with many of its advertising clients, maintains that its advertising analytics are driving more sales than it shows. In a blog post on September 22, Facebook executives said that because of Apple’s privacy changes, Facebook is boosting conversions when Apple users visit websites and take actions such as purchases. He writes that he underestimates the frequency by about 15%.
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