Meta is desperate to fight back against Apple’s privacy changes

Meta is desperate to fight back against Apple’s privacy changes

Meta (META) is having a tough year. The company’s share price is down 57% so far this year, torpedoing CEO Mark Zuckerberg’s personal fortune to the tune of $72 billion, according to Bloomberg’s Billionaire Index.

As the macroeconomic climate hammers the entire tech industry, Meta and other tech companies that rely on ad-based revenue are facing a unique headwind — Apple’s ( AAPL ) massive privacy breach called App Tracking Transparency.

The feature, which lets users decide whether they want apps to track them across the web, is expected to cut $10 billion of Meta’s revenue this year, the company said in February. Now, the company is being accused of trying to circumvent the feature and violate state and federal data collection laws in a proposed class action lawsuit in California.

Apple’s privacy changes have dealt a crushing blow to Meta’s bottom line, but that’s not the company’s only problem. The growth of TikTok has the social media giant trying to reinvent Instagram to appeal to Gen Z. The main Facebook app, meanwhile, has completely lost its edge with the younger set.

These issues have created a swirling vortex of awfulness that Meta is trying to escape. And it hopes its venture into the metaverse will be its salvation.

How Meta allegedly collects data on the websites you visit

Apple’s App Tracking Transparency is a setting that asks if you want to allow an app to track your movements across the web and other apps. Apps and websites do this all the time. I was searching for old game consoles on eBay (EBAY) and ads for old Nintendos (NTDOY) and PlayStations (SONY) started popping up on various sites I visited.

The idea is that by tracking users across the web, companies like Meta can build better profiles of consumer groups and use them to help advertisers more precisely target their ads to the people they hope will buy their products.

AUSTIN, TEXAS - MARCH 15: Mark Zuckerberg, via video, speaks at Into the Metaverse: Creators, Commerce and Connection during the 2022 SXSW Conference and Festivals at the Austin Convention Center on March 15, 2022 in Austin, Texas.  (Photo by Samantha Burkardt/Getty Images for SXSW)

Mark Zuckerberg speaks at Into the Metaverse: Creators, Commerce and Connection during the 2022 SXSW Conference and Festivals at the Austin Convention Center on March 15, 2022 in Austin, Texas. (Photo by Samantha Burkardt/Getty Images for SXSW)

Opting out of being tracked cuts off this access for apps, making it harder for advertisers to reach specific customers. As a result, these advertisers can focus their campaigns elsewhere. Meta isn’t the only company that has been hurt by Apple’s privacy actions. Snap has also cited it as a partial reason for some of the company’s struggles with declining ad revenue.

According to the lawsuit, filed on behalf of Facebook users and citing research by Felix Krause, Meta overrides users’ wishes not to be tracked by collecting data from websites they visit using the apps’ built-in browsers.

For example, let’s say you click a link to go to a news site’s Instagram page and click the link in their bio to read an article. When you select a story to read, it opens in Instagram’s built-in browser. That, Krause and the suit claim, is when Meta injects its own piece of code into the pages and is able to collect data about what you’ve viewed.

Meta denied any wrongdoing in a statement to Yahoo Finance, saying: “These allegations are without merit and we will defend ourselves vigorously. We have carefully designed our in-app browser to respect users’ privacy choices, including how data may be used for advertising .”

Meta throws everything at the wall

Zuckerberg and company aren’t just worried about Apple’s privacy changes. The company is also facing its biggest competition in years with the rise of TikTok. Meta has been so obsessed with tackling the challenge that TikTok has thrown its way that it’s reworking Instagram to resemble the short-form video app.

The changes have not completely won over users. A test version of the app was pilloried by users, including Kim Kardashian, so much so that Instagram CEO Adam Mosseri issued a public statement saying the company would not release that version of the software. However, he explained that Instagram will continue working towards short format video.

Meta has many reasons to be anxious about the competition. The company is losing its edge when it comes to appeal with teenagers, according to surveys from both Piper Sandler and the Pew Research Center.

It’s not just Instagram the company is changing. In July, Meta announced major changes to the main Facebook app, adding Home and Feeds tabs. Home is meant to mimic the kind of discovery engine that powers TikTok, giving users an opportunity to find new accounts to follow, while feeds are where they find posts from friends and family.

Of course, there’s also Meta’s big push into the metaverse, which it unveiled last October along with rebranding. However, the effort is draining money from Meta’s coffers, and is expected to continue to do so for years to come.

Investors don’t seem to care about Facebook’s metaverse efforts either. Just check out the stock price trajectory over the past year and you can see the collapse started the same day the company announced that Apple’s changes were about to become a multi-billion dollar problem.

And unfortunately for the Meta, it doesn’t look like that’s going to change anytime soon.

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