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Small businesses are cutting marketing costs because of Apple’s growing privacy reforms that have helped it generate billions of dollars in revenue through platforms like Facebook.
Apple has begun forcing app developers to track users and serve them personalized ads on iPhones and iPads in changes that rocked the online advertising sector last year.
Many small companies that rely on online ads to attract new customers have not realized the impact of Apple’s bans until inflation has squeezed consumer demand in major markets globally, he told the Financial Times.
That has caused companies to suddenly cut their marketing spend to save cash and find it more expensive to target consumers than before.
The problems facing small businesses have backfired on online advertising giants. Facebook, Snap, Twitter and YouTube are expected to lose $18 billion in revenue this year from Apple’s shift, according to advertising technology company Lotame. Facebook parent Meta specifically said earlier this year that Apple’s changes cost it at least $10 billion.
Nadia Martinez, founder of the California-based handmade shoe company, said: “I don’t feel the impact of Apple’s changes in 2021 as much as we do in 2022.” class in 2014.
Martinez was so successful with Facebook marketing that she founded an agency to teach other women how to become online entrepreneurs. But some of the businesses are now out of business. “Ads are becoming more expensive, less accessible, and not as effective as they used to be,” she says.
Varos, a data-sharing platform that helps ecommerce groups, analyzed data from 1,300 small businesses and found that revenue declines accelerated month-over-month in the second quarter — a 13 percent drop in June, the worst decline this year. Similarly, spending on online advertising to acquire new customers is “significantly higher” this year than last year, while overall spending on Facebook is “materially lower” this year.
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Shelley Cove, a North Carolina-based apparel company, laid off its four-person marketing team last month after finding that cash reserves were drying up and spending more money on Facebook ads wasn’t boosting sales as much as it used to.
Shelly Cove founder Matt Schroeder said: “In the past years, you could throw money at Facebook – you’d put $1 in and $2 would come back. “This doesn’t exist anymore.”
Small brands say they haven’t been hit by Apple’s policy changes after the major platforms, but supply chain issues and the global pandemic have created a “fog of war” that makes it difficult to understand why, for example, last year’s holiday sales period was disappointing.
“It was very difficult to sit back in 2021, look at the percentage change and figure out why,” said Andrew Goble, chief executive of Jambi, which sells pocket-sized unisex boxer shorts.
The result is that many small brands have not changed their marketing strategies until recently, to the detriment of online advertising platforms. Last month, Snap reported its weakest-ever quarterly sales growth, Shopify laid off 10 percent of its workforce, Meta experienced its first annual contraction in revenues and Twitter posted a loss.
Meanwhile, Google Search and Amazon’s ad business, which do not rely on third-party “tracking” and are unaffected by Apple’s policy, increased in the second quarter. Apple’s own advertising business, search ads, has also stolen market share and is now expanding into more places in the App Store.
“The user’s data belongs to them and they get to decide who and with whom to share their data,” Apple said of the privacy changes.
Women’s health online store Obvi was among the companies hit last November by a sudden drop in the cost of acquiring new customers.
Chief marketing officer Ashvin Melwani said: “We’re coming off one of the best years ever, fully loaded and incredibly profitable, and we’re about to hit Black Friday and make a big splash when it all comes crashing down on us.
Before Apple’s law took effect, Obvi spent an average of $30 to acquire a new customer on Facebook, and that customer spent around $60. That cost tripled to $90 last fall, turning a profitable business into a cash burn.
Melwani said his marketing budget was about $20,000 a day, with 90 percent going to Facebook. Over the past few months, Obvi has cut its budget, shifted spending to TikTok, and reoriented the company toward repeat customers.
“What went down was Facebook lost 50 percent of its data,” he said, referring to the iPhone’s market share in the US. “This huge algorithm they built is now missing half of the data, so everything is messed up. Like, imagine losing half your brain.
Kelly Dean, vice president of marketing at Kenko, a Portugal-based powder smoothie maker, said the biggest impact from Apple’s privacy policy has come in the last four to six months, but it’s hard to know the impact on advertising platforms. Tinker with their strategy in response.
“There were a lot of platform-wide oddities. [customer acquisition cost] “Spikes that we don’t really know why,” she said. “It’s very reassuring that we’re not the only ones.”
Shelly Cove Schroeder has cut its digital advertising budget to a third of what it was a month ago, hoping to keep the business going with returning clients. “To say ‘Apple killed my business’ is irresponsible,” he said. “I’m self-reflecting – I realized that I’m too dependent on Facebook.”
“Any small business, at least online, is at the mercy of these big tech giants,” he added. There is no way around it. So if they do something to screw you up, you’re screwed.
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