Big tech companies have been doing well in recent years. In the second quarter of 2022, the situation was different, such as stagnant growth and recession, but each company was talking about the impact of two companies. The two companies are Apple and ByteDance, the company behind TikTok.
Every three months, Wall Street watches with anticipation a flood of earnings reports from big tech companies. In just over a week, Snap, the company that owns Snapchat, Alphabet, the parent company of Google, Microsoft, Meta Platforms, the company that owns Facebook, Spotify, Amazon, and Apple, have all announced their performance to investors. Noda.
Earnings reports over the past few years have been tales of sky-high success, with revenues, profits and user counts all generally trending upwards. However, in this second quarter earnings call, the tech giants spoke of sluggish growth and recession, and revised their forecasts in the face of the prospect of a severe recession.
And at every financial results briefing, the names of the two companies were the topic of conversation from beginning to end. ByteDance, which runs Apple and TikTok.
The two companies are playing an increasingly important role in the tech world, and as a result, they have cast a heavy shadow over the earnings of other tech companies. TikTok reached 1 billion users in less than five years, far ahead of previous apps like Facebook and Instagram, which took eight years to reach the same goal. There could be changes from Apple that could affect other companies’ reach to customers and competition in the metaverse.
Headwinds for tech companies
The snap on July 21 was the first in a series of earnings announcements this time. The company has 347 million daily active users, more than analysts expected 343 million. Still, earnings were underwhelming. “Q2 results do not reflect our ambitions,” CEO Evan Spiegel said during the announcement.
Dan Ives, principal analyst at Los Angeles investment firm Wedbush Securities, called the results “a disaster.” Ives said Snap’s results reflect “a slowdown in digital advertising, headwinds from Apple’s iOS privacy efforts, and increased competition from TikTok.”
Snap’s chief financial officer, Derek Anderson, also confirmed that during an analyst briefing held alongside the earnings call. “Whether it’s TikTok or other very large and sophisticated players in the space, the competition is only going to get tougher,” Anderson explained.
A day later, on July 22nd, Twitter’s financial results focused on $33 million spent on work related to Elon Musk’s unreliable acquisition of the company.. The company announced a year-on-year decline in revenue, which it said reflected “headwinds in the advertising industry.”
Twitter did not hold a briefing for analysts and did not name Apple. Still, the “headwind” here was probably the “code” for the changes the company made in how it shared data.
Alphabet, the parent company of Google and YouTube, announced its financial results on July 26. During an earnings call, CEO Sundar Pichai explained that more than 1.5 billion users watch “Shorts,” YouTube’s “TikTok-esque” short videos, each month. The next day, Meta Platforms, which operates Facebook and Instagram, also announced earnings.
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Confusion caused by app imitation
“The great innovation of TikTok was realizing that social media no longer had to be social, it was just media,” says digital strategist Jay Owens. It’s this realization that other companies, most notably Instagram-owned Meta, are trying to follow suit.
“Meta definitely had the data to show that friends and family were no longer the main drivers of engagement on Instagram and Facebook. I didn’t have the courage to take the leap,” says Owens. “Right now, Meta is desperate to catch up. Users will likely have not one, but three apps that feature vertical videos.”
Instagram head Adam Mosseri has already decided to revert some of the key changes to the app after backlash from the public. Still, Instagram will likely still pursue a strategy that pushes “reels.”
All of these are concerns for users. Users are witnessing the multitude of different apps they use transform into super-apps that look and behave like Frankenstein’s monsters, with only a different logo.
“It’s a strategic mess,” says digital strategist Owens. “Platforms need to double down on content investment and nurture creators, from first-time viral hitters to global stars. It takes away the power of creators.”
While all apps are in a race to imitate each other, they also face another big problem. The results of Snap, Twitter and Meta all highlighted one of the existential problems of online advertising and user tracking. That issue is Apple’s iOS 14.5 introduced a change that allows users to opt out of being tracked by major apps.
Headwinds of Apple’s Enforced Privacy
Apple’s introduction of App Tracking Transparency (ATT) empowers end users. But for the app, it’s a mechanism that deprives the user of access to their data.
In the past, apps were accustomed to making money off of their users’ data. With the introduction of ATT, users can choose to consent or refuse to allow apps to track them and report their data to advertisers.
Opt-out functionality has existed for some time, but traditional methods have never been as clear-cut as Apple’s unavoidable pop-ups. Meta could lose $10 billion in ad revenue this year because of this confirmation screen that pops up on Apple devices.
“We continue to face headwinds to targeted and measurable advertising, such as changes to Apple’s iOS, but we believe this contributes to the growth challenges of the digital advertising industry as a whole.”, Meta’s Chief Financial Officer Dave Wenner, who became Chief Strategy Officer in a post-earnings briefing transition. Alphabet’s chief business officer, Philip Schindler, has admitted that “some advertisers have lowered their spending” due to uncertainty within the industry.
The change was a particularly hard blow to Meta’s assets and, combined with the rise of TikTok, gave the company a one-two punch. Meta is losing users to TikTok, and as a result, the advertisers who want their products seen by the most people.
Andrew Rosen, founder and president of media analytics firm Parqor, said, “The tendency for users to move from their service to TikTok, coupled with the fact that monetization has become more difficult after the introduction of ATT, has led Meta to sell its product over and over again. We had to redesign it,” he says.
Apple holding up
In response, Meta CEO Mark Zuckerberg laments Apple for more than just changing the way apps can track users. In an internal statement, Zuckerberg said Apple was in a “very deep philosophical race” over the future direction of the Metaverse, tech news site The Verge reports. was.
Meta has played a key role in forming the Metaverse Open Standards Group, a cross-industry standardization body. But Apple didn’t want to get involved. Zuckerberg believes this is a sign that Apple wants to develop a closed system tied to its own headsets in the Metaverse, similar to the environment it has developed with the iPhone.
Apple’s results, released on July 28, showed that the company was holding up, with total revenue beating analyst expectations, unlike some of its competitors. “This quarter’s record performance is a testament to Apple’s commitment to constantly innovating, advancing new possibilities, and enriching the lives of our customers,” said Tim, Apple’s CEO. Cook says
