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Facebook and Google stocks have diverged, and the reason is Apple

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Mark Zuckerberg is the Facebook chairman and chief executive officer (L) along with Sundar Piichai, Google’s CEO.

REUTERS

While FacebookIt is currently in the middle of its biggest stock drop everGoogle is at an 18 month low and trading near the record. outperformedAll its Big Tech counterparts over the last year.

It’s the difference Apple.

Google and Facebook remain the most prominent online ads companies in the United States. They have for many years. Although the businesses do different things and each have had unique challenges, their five-year stock charts look very similar.

Until you hit late 2021.

Facebook and Google since 2017

This is when Facebook was founded. Mark Zuckerberg’sThe financial health of his company was impacted by his longstanding struggle with his fate.

For distribution, Facebook apps almost exclusively rely on Apple and Google. Apple is the only company that can distribute its apps. changed its privacy policyFacebook lost one of its most valuable assets last year when it restricted the app developer’s ability to target users.

Google also relies on ad targeting to connect marketers with users on many of its properties, but search advertising is a unique asset — users tend to “self-target” as they’re typing in a search query that explains exactly what they’re interested in at that moment.

Google Android is the best operating system for targeting. giving it controlIts own policies. Google is still dependent on iOS distribution but has an even better relationship with Apple. Google pays Apple billions of dollars a yearSafari’s default search engine.

All of this combined, Facebook has just informed Wall Street about Apple’s App Tracking Transparency feature (ATT). This will likely result in Facebook having to pay a significant amount. $10 billion in revenue this year. This is why Facebook’s revenue forecast for its first quarter was so low. the stock plummeted 25%Its biggest drop was Thursday. This is its lowest point since August 2020.

Google, meanwhile, reported blowout fourth-quarter resultsThe company reported an increase of 33% in its ad revenues, as opposed to the 20% seen on Facebook. Analysts expect Google parent AlphabetFacebook expects to see a 23% increase in revenue for the quarter. However, it is expecting a mere 3%- to 11% growth.

On Wednesday, Dave Wehner (CFO at Meta Facebook), stated that when Apple treats search less favorably than the other apps due to the Google deal, there is an incentive for the policy discordance to continue.

Shifting market share

Analysts are able to see this correlation. Advertising agencies that are unable to get the targeting they desire on Facebook spend more money on Google.

Did Apple iOS’s changes cause a shift in market share from Facebook to Google? Rohit Kulkarni, MKM Partners’ report writer, wrote on Thursday. “Yes. We think so.” MKM is rated as a buy on both tocks.

Sheryl SandbergFormer senior executive at Google and Facebook’s chief operating officer, he said that Apple’s recent changes were most damaging to small- and medium-sized companies, who are heavily dependent on targeting and personalization in advertising.

“So we’re definitely seeing that this has more of an impact for SMBs,” she said.

Zuckerberg was concerned about this possibility since a while. Facebook doesn’t have the operating system or device it needs to chart its own course and can only do so with the help of others. Facebook developed its phone over a decade ago. disaster.

This is what Facebook stated in its risk factors. IPO prospectus2012. 2012 was the beginning of mobile technology for the company.

“We rely on Facebook interoperability to popular mobile operating system that we cannot control such as Android, iOS and Android. Any modifications in these systems that affect our products’ functionality, or provide preferential treatment of competitors could adversely impact Facebook usage on mobile devices.”

Facebook CEO Mark Zuckerberg can be seen fencing in “Metaverse”, with an Olympic gold-medal fencer, during a live streamed virtual and augment reality conference. This screen capture is taken from a video that was released on October 28, 2021.

via Reuters| via Reuters

Facebook purchased a young virtual reality headset manufacturer called Virtual Reality. Oculus for $2 billionThis gives the company the chance to make the next generation hardware as well as integrate its own software.

This acquisition provides the foundation of the future Zuckerberg longs for. He purchased the company in late last year. changed Facebook’s nameMeta Platforms. According to Thursday’s earnings reports, the company announced that the Reality Labs group is home for the development of virtual reality. lost more than $10 billionIn 2021.

The investors are correct to be worried. Investors are rightly worried about Facebook’s core business, which is losing users. Apple is showing panic.

The virtual world may offer the solution to Zuckerberg’s real-world problems. He wants to get out of Apple and Google so that his company can make the rules.

— CNBC’s Kif Leswing and Jennifer Elias contributed to this report.

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