The IT Nerd

Facebook reported their Q4 and full year results yesterday. And the numbers were stunning. Here’s the highlights. Or low lights if you are Mark Zuckerberg:

• They made money as their profit came in at $10.3 billion in the fourth quarter. That was under what the street was expecting.
• Their daily active users fell to 1.93 billion, the first quarterly decline on record. That’s not a good sign going forward.
• The company offered lower guidance for the first quarter of 2022, saying it would be expecting around $27 to $29 billion in revenue, short of the $30 billion that the street was expecting.
• Apple’s privacy moves apparently will cost the company a staggering $10 billion in 2020.

And you can predict what happened next. The stock went into free fall after hours and was down 21.55% in premarket trading at $253.40 as of 4.02 a.m. ET, having closed on Wednesday at $323. This in turn shaved roughly $24 billion off of Mark Zuckerberg’s net worth. Not that I feel sorry for him or anything of the sort.

So, why did this happen. According to Zuckerberg during the earnings call, it’s Apple’s fault.

First, ads. Like others in our industry, we’ve faced headwinds as a result of Apple’s iOS changes. As we described last quarter, Apple created two challenges for advertisers. One is that the accuracy of our ads targeting decreased, which increased the cost of driving outcomes. The other is that measuring those outcomes became more difficult.

Then Facebook’s chief financial officer, David Wehner piled on by saying that Apple favours Google when it comes to ads:

And if you look at it, we believe those restrictions from Apple are designed in a way that carves out browsers from the tracking prompts Apple requires for apps. And so what that means is that search ads could have access to far more third-party data for measurement and optimization purposes than app-based ad platforms like ours.

So when it comes to using data, you can think of it — that it’s not really apples-to apples for us. And as a result, we believe Google’s search ads business could have benefited relative to services like ours that face a different set of restrictions from Apple. And given that Apple continues to take billions of dollars a year from Google Search ads, the incentive clearly exists for this policy discrepancy to continue.

Seeing as Google does pay Apple the GDP of a medium sized country to be the default search engine on Apple products, Wehner might have a point. Or at least Wehner might have created an optics issue for Apple. But even with that, let’s call this for what it is. Zuckerberg is in a business where data mining the daylights out of their users to make a buck is Facebook’s business model. Thus he then can’t be surprised when someone makes an effort to stop that from happening and it costs him money. Maybe he needs a better or different business model? Just a thought.

I wonder if this is the beginning of the end of Facebook? Tune in next quarter to find out.

This entry was posted on February 3, 2022 at 9:51 am and is filed under Commentary with tags Facebook. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.