Facebook (Nasdaq: FB) CEO Mark Zuckerberg has not avoided his words on the company’s recent earnings call.
“I want to highlight what we see more and more Apple (Nasdaq: AAPL) As one of our biggest competitors, ”said the head of Facebook.
It is rare for company executives to talk about competitors in direct terms, especially on earnings calls, as management generally wants to minimize potential competition and usually does not mention competitors by name.
This is not the first time that Apple and Facebook have overshadowed each other. Referring to the use of Facebook’s tracking tools, Apple CEO Tim Cook called such companies “out of complete control” in 2018 and responded to Zuckerberg’s recent call-out to succeed, saying “technology does not require a huge amount of personal data”. Another reference.
The two companies have long been at loggerheads over privacy issues, but now that billions of dollars are at stake in this war, the stakes are high.
Image Source: Facebook.
Uncertainty ahead for Facebook
Facebook smashed analysts’ estimates in its fourth quarter report, but share prices still fell in the report as management warned of “significant uncertainty ahead”, primarily due to Apple’s rollout of its new mobile operating software software IP14L14.
IOS 14 includes a number of changes designed to enhance user privacy and control over their data. Apps like Facebook will now have to ask users for permission to track or use the device’s ad identifier, which allows for the type of ad targeting that is central to Facebook’s ad production.
For Facebook, the change represents an unusual level of uncertainty in its business. And it repeatedly warns its millions of advertisers of the hurdles that iOS 14 is likely to cause. On the earnings call, Zuckerberg blamed Apple Pal:
Apps Pal has every incentive to use their dominant platform position and every incentive to interfere with how other apps work, which they do regularly for their own choice. With these upcoming iOS 14 changes affecting the growth of millions of businesses around the world, many small businesses will no longer be able to reach their customers with targeted ads. Apple Paul may say that they are doing this to help people, but this move clearly exposes their competitive interests.
Regarding the removal of ad targeting tools, Chief Rating Operating Officer Cheryl Sandberg added: “Small businesses are really concerned because they are concerned that they will not be able to buy effective advertising. . ”
Small businesses make up the majority of Facebook’s 10 million advertisers, which go through the company’s huge revenue, and those businesses are clearly concerned about change.
In an interview last week, De Deng, CEO of Australia’s digital ad agency, Right Hook Digital, compared the threat posed by small traders to the Kovid-1p epidemic, saying: “There are many similarities between this and [COVID-19]. A new phenomenon, an uncertain future, people come out as knee-jerk and cut their costs. “He also told me that as economics changes so more inexperienced advertisers are expected to run away from Facebook and that policy can also fail in a weak business. In some cases.”
Facebook’s worst case scenario of a 60% reduction in return on advertising costs would be disruptive or disastrous for many businesses that rely on the platform. The company is currently listening to these concerns and responding accordingly.
Blaming Apple Pal
For Facebook, often referred to as a monopoly itself, Apple Pal serves as a useful foil. The social media giant often carries itself as a small business hero, providing free and paid tools in which millions of small businesses rely and Sandberg shares small business success stories on Facebook on every earnings call.
Placing itself next to small businesses is a smart strategy for a company that is often at the center of controversy and distrust inquiries, as small businesses are crucial to the economy and claiming to be in their favor is politics.
Based on what Apple has to say about this saga, Facebook is invading user privacy without their permission, but according to Facebook, this strategy is in the best interests of millions of small businesses. The company also says that users prefer ads related to them.
By blaming Apple Pal, the company presents itself as a victim of a big tech company that is also harming Facebook in order to take advantage of its apps like iMessage. Apple Pal is also the subject of antitrust investigations, especially considering its relationship with apps, so it’s a smart argument for Facebook.
What does this mean for Facebook investors
It’s hard to doubt after Facebook’s business was recently reported. Revenue grew 33% year-over-year to ૨ 2.1 billion, and operating operating income rose 44% to $ 12.8 billion, reaching a 46% fat operating margin.
However, the company faces a number of risks, including the possibility of increased regulation and the threat of a second reaction, such as an advertiser boycott last year, but management seems most concerned about the implications of iOS 14.
The good news is that Facebook’s guidance doesn’t seem to expect any major impact from the rollout and it also calls for rapid growth in the first half of the year as it is in the worst state of the epidemic. However, it expects slower growth in the second half of the year and is expected to begin disruption for iOS 14 by the end of the first quarter.
Investors should also keep in mind that Facebook was smarter before it needed to adapt, whether it was transitioning to mobile in the company’s early days as a publicly traded company, or a change in response to Russian hacking and Cambridge Analytica in the 2016 election. Scam. Facebook will definitely not be standing still at this point, as it will adjust its algorithms and continue to build new features like e-commerce mercer.
Overall, this issue deserves the attention of investors, but it is not a reason to sell, especially given the solid value in the stock. Keep an eye on the iOS 14 rollout in the coming months as tensions with Apple Pal will only intensify from here.
