By Therese Poletti
After Snap Inc. lost more than a quarter of its market value and took other internet stocks down with it last week, there were fears that Apple’s recent privacy changes would upend the entire internet advertising market.
But as it turns out: Not so much, at least so far. While Facebook Inc. /zigman2/quotes/205064656/composite FB -1.14% and Alphabet Inc.’s /zigman2/quotes/205453964/composite GOOG -0.87% /zigman2/quotes/202490156/composite GOOGL -0.67% YouTube showed some effects in their earnings reports this week, they were not as dramatic as the issues Snap /zigman2/quotes/205087158/composite SNAP -2.34% experienced. And Twitter Inc. /zigman2/quotes/203180645/composite TWTR -1.36% only saw modest effects. Google in particular seems immune to the issues, as its rival Android operating system insulates its products from Apple’s changes.
On Tuesday, both Alphabet and Twitter reported third-quarter results that managed to avoid significant hits to their revenue as a result of the changes that Apple /zigman2/quotes/202934861/composite AAPL -1.17% made to its iPhone iOS that lets users opt out of tracking by advertisers. Snap has been the hardest hit so far, but Facebook also said its revenue was hurt by the changes, and both companies gave disappointing forecasts for the fourth quarter.
Investors who have been nervous about the potential impact of these changes were relieved by the results at Alphabet, which exceeded estimates, while its YouTube business was only modestly impacted, executives said.
“So overall, as we’ve said, we’re pleased with the strength across our business in the third quarter, it was broad-based, it was global,” said Alphabet Chief Financial Officer Ruth Porat. “In terms of the iOS 14 changes specifically, they had a modest impact on YouTube revenues.” YouTube revenue came in at $7.2 billion, about $200 million shy of analysts’ consensus estimates of $7.4 billion.
“Compared to some of the other digital advertising companies, Google search is less affected by the Apple IDFA changes,” said Chris Rossbach, chief information officer of J. Stern & Co. in London, in an email. He said that Google may have seen a benefit from some advertising shifting to search. “In addition, many Google users are on computers or on Google’s own Android operating system. These results have highlighted the resilience of Google’s search.”
In a note to clients Tuesday, Bernstein Research analyst Mark Shmulik said Alphabet shares proved a refuge.
“With hair all over the digital ad names, Google seemed a safe place for investors to hide out and, for the most part, they were right,” he said. “With modest revenue beats, continued surprising strength in operating margins, and no known grey hair-inducing incremental headwinds, investors [were] justified in their decision to hide out here. Cue the ‘Squid Game’ music”
Twitter also said the impact was less than expected, so far.
“It is still too early for Twitter to assess the long-term impact of Apple’s privacy-related iOS changes, but the Q3 revenue impact was lower than expected, and we have incorporated an ongoing modest impact into our Q4 guidance,” Twitter executives said in the company’s shareholder letter on Tuesday.
However, there was another factor that had a surprise impact.
Snap executives said in their conference call that the global supply-chain issues were impacting advertising, because companies did not want to advertise products they had in limited supply.
Google added that nearly all its specific verticals were in line with the widespread supply-chain weakness, such as in the auto industry.
So while the long-feared internet “ad-megeddon” among the tech giants may have been overblown, and is affecting each company differently, investors should still pay attention.