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

Meta (META) is having a rough year. The company’s share price is down 57% year-to-date, taking CEO Mark Zuckerberg’s personal fortune to $72 billion, according to Bloomberg’s Billionaire Index.

As the macroeconomic climate hits the entire tech industry, Meta and other tech companies that rely on ad-based revenue face a unique headwind – Apple’s (AAPL) massive privacy change called App Tracking Transparency.

The feature, which lets users choose whether apps should track them across the web, is expected to cut Meta’s revenue by $10 billion this year, the company said in February. Now the company is accused of attempting to circumvent the feature and violating 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 pushed the social media giant to reinvent Instagram to appeal to Gen Z. The main Facebook app, meanwhile, has completely lost its advantage over the younger groups.

These issues have created a swirling vortex of awfulness that meta is trying to escape. And it hopes that its gamble on the metaverse will be its savior.

How Meta Supposedly Collects Data About 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 looking for old game consoles on eBay (EBAY) and ads for old Nintendo (NTDOY) and PlayStation (SONY) came up on various websites I visited.

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

AUSTIN, TEXAS - MARCH 15: Mark Zuckerberg speaks via video at Into the Metaverse: Creators, Commerce and Connection during the 2022 SXSW Conference and Festival 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)

However, if you opt out of being tracked, apps are prevented from being tracked, making it harder for advertisers to reach certain customers. As a result, these advertisers could focus their campaigns elsewhere. Meta isn’t the only company affected by Apple’s privacy measures. Snap has also cited this 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 based on research by Felix Krause, Meta circumvents users’ desire not to be tracked by collecting data from websites they visit with their apps’ built-in browsers .

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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. Once you select a story to read, it will open in Instagram’s built-in browser. Krause and the Suit claim that Meta injects its own code into the websites and can collect data about what you’ve been viewing.

Meta denied any wrongdoing in a statement to Yahoo Finance, saying: “These allegations are unfounded and we will vigorously defend ourselves. We carefully designed our in-app browser to respect user privacy settings, including the way data may be used for ads.”

Meta throws everything at the wall

Zuckerberg and co. aren’t just concerned about Apple’s privacy changes, however. With the rise of TikTok, the company also faces its biggest competition in years. Meta was so obsessed with tackling the challenge that TikTok got in the way of having it revamp Instagram to more closely resemble the short-form video app.

The changes have not entirely won over users. A trial version of the app drew so much criticism from users, including Kim Kardashian, that Instagram CEO Adam Mosseri released a public statement saying the company would not be making this version of the software live. However, he stated that Instagram will continue its push towards short-form video.

Meta has many reasons to worry about the competition. According to surveys by Piper Sandler and the Pew Research Center, the company is losing appeal among teenagers.

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Not only Instagram is changing. In July, Meta announced major changes to the main Facebook app, adding “Home” and “Feeds” tabs. Home is designed to mimic the kind of discovery engine that powers TikTok and give users the ability to find new accounts to follow, while Feeds is where they can find posts from friends and family.

Of course, there’s also Meta’s big foray into the metaverse, which it unveiled alongside its rebrand last October. However, the effort is pulling money out of Meta’s coffers and will likely continue to do so for years to come.

Investors also don’t seem to care about Facebook’s Metaverse efforts. Just look at how the stock price has performed over the past year, and you can see how the collapse began on the same day the company announced that Apple’s changes would become a multibillion-dollar problem.

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

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