Snap is finally seeing the effects of Apple’s iOS 14 privacy changes on its ad business and the changes have had a bigger impact than it expected.
The company reported revenue of just over $1 billion for the third-quarter of 2021. But despite that being a new milestone for Snap, it was $3 million shy of what the company had previously estimated. Snap executives said Apple’s iOS changes that make it more difficult for advertisers to track users were largely to blame for the shortfall.
“Our advertising business was disrupted by changes to iOS ad tracking that were broadly rolled out by Apple in June and July,” CEO Evan Spiegel said during a call with analysts. “While we anticipated some degree of business disruption, the new Apple provided measurement solution did not scale as we had expected, making it more difficult for our advertising partners to measure and manage their ad campaigns for iOS.”
It wasn’t all bad news for Snap, though. The company once again beat expectations on user growth, adding 13 million new daily active users for the second quarter in a row. Snap now has 306 million DAUs, a new high for the company.
Still, Spiegel called it a “frustrating setback” for the company, but added that increased privacy protections are “really important for the long term health of the ecosystem and something we fully support.”
The iOS 14.5 update forced developers to ask users to explicitly agree to sharing their device identifier (known as IDFA), which is used by advertisers to track users across apps and services. Though Apple previewed the changes more than a year ago, the update wasn’t released until April. Since then, third-party analytics have estimated that a vanishingly small percentage of iOS users agreed to allow apps to track them.
Snap isn’t the only company that has warned about Apple’s iOS changes on its ad business. Facebook, which has been publicly slamming the changes for more than a year, saying the changes will have an outsize impact on developers and small businesses. But Facebook has also warned investors that the changes are likely to hurt its own ad revenue in 2021. The social network is reporting its third-quarter earnings Monday, when it will share just how significantly it’s been affected.