A class action lawsuit says Snapchat misled investors about the impact Apple’s privacy changes would have on the company’s ad business.
Investor Kellie Black told the Los Angeles federal trial court last week that the company failed to disseminate accurate information leading up to Apple’s privacy changes going into effect.
Apple announced changes last year that would force apps to ask users if they consent to being tracked. Apple first announced its changes in June 2020, prompting Snap to announce in its July 2020 quarterly financial report that the updates “may reduce the quantity and quality of the data and metrics that can be collected or used by us and our partners.”
“The impact of these proposed changes on the overall mobile advertising ecosystem, our business, and the developers, partners, and advertisers within our community is uncertain depending on how these changes are implemented, how we and the overall mobile advertising ecosystem adjusts, and how our partners, advertisers, and users respond, could seriously harm our business,” Snap said at the time.
Snap made similar statements throughout the next year, but expressed more optimism in July 2021 as Apple began to implement its updates.
“As Apple rolled out its App Tracking Transparency-related changes near the end of Q2, we observed higher opt-in rates than we are seeing reported generally across the industry, which we believe is due in part to the trust our community has in our products and our business,” Snap said in its July financials.
But when Snap announced its Q3 performance on 22 October, it revealed that Apple’s privacy updates did more damage to the company’s revenue than it had initially anticipated. Snap earned about $1 billion in revenue this latest quarter, which was about a 57% increase year-over-year but only 1% up from Q2 2021.
Snap chief executive Evan Spiegel attributed the earnings shortfall to the privacy updates.
“Our advertising business was disrupted by changes to iOS and tracking that were broadly rolled out by Apple in June and July … making it more difficult for our advertising partners to measure and manage their ad campaigns for iOS,” Spiegel said on 22 October.
Snap’s stock plunged 26% on this news, falling from about $75 to $55 per share on 22 October.
The lawsuit said Snap made numerous false or misleading statements leading up to the announcement. It accused Snap of failing to disclose that Apple’s changes would have a material impact on its advertising business, and that Snap overstated its ability to “transition its advertising with Apple’s privacy changes.”
The putative class action also accuses Snap of downplaying the risks of the impact Apple’s changes would have on its advertising business – and overstating its commitment to privacy.
The lawsuit seeks damages and legal costs.
Snap did not respond to a request for comment.
Council to plaintiffs
The Rosen Law Firm
Partner Laurence Rosen in Los Angeles