Facebook said it has been underreporting ad performance on Apple iPhones due to recent iOS changes, telling advertisers in a blog post on Wednesday that, in aggregate, the company is underreporting iOS web conversions by approximately 15%.

Graham Mudd, vice president of product marketing at Facebook, said the company "expected increased headwinds" from the recent iOS updates "to have a greater impact in the third quarter compared to the second quarter." 

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"We've heard from many of you that the impact on your advertising investment has been greater than you expected. The cost of achieving your business outcome may have increased, and it's also gotten harder to measure your campaigns on our platform," Mudd said. 

"In some cases, this is due to underreporting on our part. Our estimate is that, in aggregate, we are underreporting iOS web conversions by approximately 15%; however, there is a broad range for individual advertisers. We believe that real-world conversions, like sales and app installs, are higher than what is being reported for many advertisers."

During a July earnings call, Facebook said that Apple's decision to roll out a new app tracking transparency feature would affect its bottom line.

At the time, Facebook CFO David Wehner said the company was expecting "increased ad targeting headwinds in 2021 from regulatory and platform changes."

Apple's long-awaited app tracking transparency tool allows users to decide whether they agree to their data being tracked across various different apps and websites.  

As part of iOS 14, iPadOS14 and tvOS14, the feature requires apps to get users' permission before tracking their data across other companies' apps or websites for advertising purposes. When users ask not to track their data, apps will also have to refrain from sharing information with data brokers. 

Facebook criticized the changes as being a ploy by Apple to gain more control over the advertising market. At the same time, Apple said its changes were designed to offer consumers more privacy options. In January, CEO Mark Zuckerberg argued that Apple's changes are aimed at benefiting iMessage and will harm small businesses.

He implied the beef was actually between WhatsApp and iMessage, taking time out to slam Apple for its own data collection practices. 

"iMessage is a key linchpin of their ecosystem. It comes pre-installed on every iPhone, and they prefer it with private APIs and permissions, which is why iMessage is the most used messaging service in the US. And now we are also seeing Apple's business depend more and more on gaining a share in apps and services against other developers and us. So Apple has every incentive to use their dominant platform position to interfere with how our apps and other apps work, which they regularly do to preference their own," Zuckerberg said. 

"And this impacts the growth of millions of businesses around the world, including with the upcoming iOS 14 changes. Many small businesses will no longer be able to reach their customers with targeted ads. Now Apple may say that they're doing this to help people, but the moves clearly track their competitive interests. And I think that this dynamic is important for people to understand because we and others are going to be up against this for the foreseeable future."

A study from Flurry found that when the changes were initially rolled out, just 15% of iOS users worldwide decided to allow app tracking. The numbers for US customers are even lower at just 6%.

Flurry

Facebook's stock was down 4% for most of Wednesday morning. 

The back-and-forth was yet another salvo in the dispute between the two technology giants, which routinely butt heads over a variety of issues. 

In his message to advertisers, Mudd suggested companies wait for a minimum of 72 hours or the full length of the optimization window selected before evaluating performance for conversion-optimized campaigns, analyze reporting at the campaign level, set up Conversions API and more. 

Mudd added that Facebook plans to make changes on its end by improving conversion modeling, accelerating investments to address reporting gaps, tracking web conversions, enhancing measurements and fixing bugs.

"Our top priority is making sure that you're able to reach current and new customers, drive your marketing objectives and measure the performance of your advertising campaigns while helping you honor customers' choices around privacy," Mudd said.

"Over the coming months, we'll continue to introduce new tools to further help with delivery effectiveness and measurement." 

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