This month, Apple launched iOS 14.5, which asks iPhone users for permission before advertisers can track their actions. For months, advertisers have been anticipating the change after Facebook made their distaste for the update known when it became apparent it will likely impact their primary revenue generator.
In 2020, Google and Facebook combined to account for over 50% of the $140 billion spent on digital advertising in 2020. Their secret sauce? Sure, they have a large captive audience for marketers to place ads in front of. But the most appealing aspect of these ad platforms isn’t just the placements, it’s the technology that powers them.
Up until now, if you’ve run ads on Facebook, you had free reign to aggregate (anonymous) information about how users interact with your website. Using Facebook’s pixel, you could track events users take on your app and website. This technology is what allows savvy marketers to develop sophisticated retargeting strategies. It’s what enables that Away luggage or HelloFresh ad to follow you around the internet until you finally just give in. #noregrets It allows advertisers to develop highly measurable, predictive, and optimizable promotions as they follow customers through their sales funnel.
This technology was a marketer’s dream come true less than fifteen years ago, and has changed the landscape of how businesses win customers forever.
However, it’s not the loss of the tracking component that should worry Facebook or those savvy marketers the most. By limiting the scope and breadth of Facebook’s event tracking, Apple is waging war on one of its biggest competitors by cutting off its supply lines. The events advertisers track are what turns the gears of Facebook’s machine learning. Without the constant diet of real-time user data, the true super power Facebook wields against competing ad platforms could be crippled overnight.
Will the Apple iOS 14.5 Update Affect Facebook Ad Optimization?
Yes. I mean, how could it not?
Is that a big deal? For Facebook, one would think so.
In my opinion, Facebook is uniquely competitive as an ad platform for a few reasons:
- User data collected via the Facebook pixel is tied to a user’s account profile (as opposed to Google where it’s up to the advertiser to string their actions together).
- The platform is easy to use with no budget minimum, making the platform accessible to anyone with an internet connection.
- Advertisers can choose a specific action they want their ads to prioritize delivering, and Facebook’s behemoth machine learning algorithm will work to deliver more of those actions at the lowest cost while media buyers kick back and watch the numbers increase.
This combination of factors creates an extremely appealing ecosystem for advertisers. But what will happen to Facebook’s market dominance if something happened to one of them?
That may be what Facebook fears most as they witness the rollout of iOS 14.5. As iPhone users begin to opt-out of tracking, Facebook’s precious data machine is at jeopardy of a stark decline in accuracy, consistency and efficiency.
Machine learning is a product of the data it’s fed. So when Facebook starts receiving potentially far less data as more users who were previously feeding the algorithm opt-out, what will the impact be? This is yet to be seen, but one could extrapolate a trickle down effect that could seriously damage their multi-billion dollar business model, as well as the effectiveness of your ad campaigns.
Is it a big deal for brands who advertise with Facebook? It probably depends.
For monster brands like Ikea and Taco Bell, ads on social media are often still measured by CPM, or cost per thousand impressions. They still evaluate the effectiveness of their media similarly to how they did during the pre-algorithm, mass media era.
But think for a moment about the thousands of small B2B and B2C businesses relying on finely-tuned direct-response funnels weaving through awareness, purchases, upsells, and referrals. These predictive campaign strategies are possible due to the optimization algorithm Facebook affords marketers of all sizes. With free drag-and-drop design tools at your fingertips, anyone can create a set of colorful ads, then simply choose an objective and watch the white paper downloads, email signups, add to carts, purchases, and re-purchases roll in. The Facebook machine will test all of your variables as efficiently as possible, and in real time, the campaign will determine which message to show to whom, when, and deliver your desired results in a mere days.
Without the data to inform the algorithm though, Facebook’s voodoo magic could be reduced to the effectiveness of point and shoot banner ads. This may be a bigger deal for those small businesses. We’ll find out in the weeks and months to come.
What should you do about it?
Perhaps before we can consider what you can or should do to protect your Facebook marketing strategy, we should look at what Facebook is doing about it.
The first thing they’ve done is begin shifting their reporting from accurately attributed metrics to estimated results based on their own statistical modeling. This will give Facebook something to fall back on when advertisers see the number of conversions they’re used to seeing, decline significantly. This could present a situation to watch out for, where Facebook may start asking you to trust them with your fragile marketing budget based on magic math that one might assume could tilt in their favor. So when it comes to reporting, it’s best to have your own tracking technology set up to attribute results appropriately for you to evaluate. Don’t just rely on the numbers Facebook provides to evaluate your media effectiveness.
Additionally, be prepared to test new channels and diversify your media strategy. Relying solely on one channel for your marketing is a ticking time bomb. 20 years ago, Google search ads were the most cost effective way to drive traffic and conversions. While still an effective part of many brands’ media mix, its a good illustration of how times change. The key is to use a small portion of your media budget to always be testing new channels and opportunities. It’s something we at Three Five Two bake into our strategy workshops with our partners.
To recap, here’s what we know:
- Apple is giving iPhone users the power to opt-out of event tracking completely.
- If a significant number of iPhone users do choose to opt-out, it could harm one of Facebook’s biggest competitive advantages by reducing the volume of data feeding their ad optimization algorithm.
- Facebook will try to reduce the damage by controlling the narrative by reporting estimated results.
- To reduce the damage this may cause to your business, plan ahead to set up your own tracking and reporting system. And make channel testing part of your strategy to identify new opportunities and diversify your media mix.