Facebook ad spending continues to grow, but it won’t be unscathed by iOS privacy changes

Since Apple’s AppTrackingTransparency (ATT) framework in iOS 14.5 took effect in late April, Facebook has experienced steadily worsening data loss as iOS users have adopted the update. For Facebook, data loss includes user-level data posted back from IDFAs as well as the Facebook pixel, the piece of tracking code placed on brand websites.

As of Q3 2021, iOS 14.5+ adoption among US social media app users had effectively reached full impact. Opt-in rates among US Facebook and Instagram users are low, cutting off Facebook’s ability to track web or app conversions and activity by a large majority of iOS app users. For advertisers, this has diminished the accuracy of targeting and measurement of Facebook campaigns.

Despite Apple’s iOS privacy changes, we estimate that US advertisers will spend $50.30 billion on Facebook advertising in 2021, up 32.1% from last year. That’s a significant increase versus our March 2021 and October 2020 expectations, when we predicted growth of 26.6% and 21.8%, respectively.

Ad spending growth on Facebook will slow to 15.5% next year as the company continues to scale following a significant increase in growth this year. However, we now predict slightly slower growth next year than we did in our March forecast—a decrease of 2.2 percentage points—due to headwinds related to Apple’s privacy changes and their impacts on the efficiency and measurement of Facebook ads.

Our new 2021 growth estimate is driven primarily by rising ad prices this year—the biggest single factor driving up total advertiser spending on Facebook platforms. Facebook CPMs—the cost per thousand impressions—have increased significantly over the past year as digital ad spending has resurged and advertisers have flocked to the platform, driving more competition into programmatic auctions.

• On core Facebook (excluding FAN), CPMs rose 47% in Q3 2021 versus Q3 2020—and +33% versus Q3 2019, according to data provided by performance marketing agency Tinuiti.
• On Instagram, CPMs increased 32% versus Q3 2020 and 23% versus Q3 2019, per Tinuiti data.

But there are also iOS-related causes of CPM increases:

• Reduced audience sizes: Some Facebook audiences, such as for retargeting, have diminished due to IDFA and pixel loss among Facebook and Instagram users who have opted out of tracking on iOS. As these audiences reduced, CPMs at the campaign level have risen—and advertisers with narrower targeting have likely seen greater increases.
• Some ad spend shifting out of iOS: Some advertisers—particularly direct-response advertisers like mobile app developers—are proactively shifting spend out of iOS on Facebook to reclaim deterministic user tracking that remains on Android mobile devices. Efforts to reach Android users have intensified, elevating CPMs among those audiences relative to iOS users.

Facebook CPMs on Android have risen substantially relative to iOS since May as iOS users gradually adopted the update, according to data provided by Tinuiti. That divergence has meant that ad spending growth to reach Android users on Facebook has accelerated since May, far outpacing growth on iOS.