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

Meta (META) is having a rough year. The company’s stock price is down 57% year-to-date, torpedoing CEO Mark Zuckerberg’s personal wealth to the tune of $72 billion, according to Bloomberg’s Billionaire Index.

While the macroeconomic climate is hammering the entire tech industry, Meta and other tech companies that rely on ad-based revenue face a unique headwind — Apple’s (AAPL) massive privacy shakeup called App Tracking Transparency.

The feature, which allows users to determine if they want apps to track them across the web, is expected to cut $10 billion out of Meta’s revenue this year, the company said in February. Now the company is being accused of trying 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 the social media giant scrambling to reinvent Instagram to appeal to Gen Z. The main Facebook app, meanwhile, has completely lost its edge with the younger set.

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

How Meta is allegedly collecting data on the sites 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 searching for vintage game consoles on eBay (EBAY), and ads for old Nintendos (NTDOY) and PlayStations (SONY) started popping up on various sites I visited.

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

AUSTIN, TEXAS - MARCH 15: Mark Zuckerberg, via video,  speaks at Into the Metaverse: Creators, Commerce and Connection during the 2022 SXSW Conference and Festivals at 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 Austin Convention Center on March 15, 2022 in Austin, Texas. (Photo by Samantha Burkardt/Getty Images for SXSW)

Opting out of being tracked, though, cuts off that access for apps, making it more difficult for advertisers to reach specific customers. As a result, those advertisers might focus their campaigns elsewhere. Meta isn’t the only company that’s been hurt by Apple’s privacy actions. Snap has also cited it as a partial reason for some of the company’s difficulties with declining advertising revenue.

According to the suit, filed on behalf of Facebook users and citing research by Felix Krause, Meta is skirting users’ wishes not to be tracked by collecting data from websites they visit using its apps’ built-in browsers.

For instance, let’s say you click on a link to go to a news site’s Instagram page and click the link in its bio to read an article. Once you select a story to read, it opens in Instagram’s built-in browser. That, Krause and the suit allege, is when Meta injects its own bit of code into the sites and is able to collect data about what you’ve been looking at.

Meta denied any wrongdoing in a statement to Yahoo Finance, saying, “These allegations are without merit and we will defend ourselves vigorously. We have carefully designed our in-app browser to respect users' privacy choices, including how data may be used for ads.”

Meta is throwing everything at the wall

Zuckerberg and company aren’t just worried about Apple’s privacy changes, though. The company is also facing its biggest competition in years with the rise of TikTok. Meta has been so obsessed with tackling the challenge that TikTok has thrown its way that it is reworking Instagram to more closely resemble the short-form video app.

The changes haven’t quite won over users. A test version of the app was pilloried by users, including Kim Kardashian, so much that Instagram chief Adam Mosseri released a public statement saying that the company wouldn’t put that version of the software live. He did, however, explain that Instagram will continue its push toward short-form video.

Meta has plenty of reasons to be anxious about the competition. The company is losing its edge when it comes to its appeal with teens, according to surveys by both Piper Sandler and Pew Research Center.

It’s not just Instagram that the company is changing. In July, Meta announced major changes to the main Facebook app, adding Home and Feeds tabs. Home is meant to ape the kind of discovery engine that powers TikTok, providing a means for users to find new accounts to follow, while Feeds is where they’ll find posts from friends and family.

Of course, there’s also Meta’s big push into the metaverse, which it unveiled last October along with its rebranding. The effort, however, is draining money from Meta’s coffers, and is expected to continue to do so for years to come.

Investors don’t seem to care about Facebook’s metaverse efforts, either. Just check out its stock price trajectory over the last year, and you can see the collapse start the same day the company announced that Apple’s changes were becoming a multibillion-dollar problem.

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

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Got a tip? Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.

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