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Apple not entirely to blame for advertisers fretting ad spend, industry watcher says

Mark Douglas, founder and CEO of MNTN, joins us on Yahoo Finance.

Video Transcript

ADAM SHAPIRO: So yesterday when Facebook disappointed some on Wall Street with its revenue numbers as well as its guidance, they actually said that this is a part of the, quote, "reflecting the significant uncertainty we face in the fourth quarter in light of continued headwinds from Apple's iOS 14 changes." All right, so they were pointing a finger at Apple, and it wasn't an index finger.

Let's talk about how different tech companies are using that excuse to hide what might else be going on in their ad sales, and to do that, we're going to bring in somebody who understands digital advertising extremely well, the CEO of MNTN, the big digital advertising company. Mark Douglas, he's joining us now. And you seem to think that when Snap did this, and I guess now Facebook doing it, that the finger they're pointing is pointed at the wrong direction.

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MARK DOUGLAS: Yeah, absolutely. So in Facebook's case in particular, Apple is basically restricting company's ability to identify a device, right? So this IDFA, that's the ID.

And so Facebook has logged-in users on every device-- on your phone, on your computer. They don't need an ID from Micro-- from Apple, I mean, to identify you. And so they're not really affected by this change, and I think validation of they're not affected by the change is they missed by $400 million out of $29 billion. If this was having some massive effect on Facebook, you would expect a much bigger impact on their business, something larger than 1.5%.

So technically this is not really the issue that Facebook is saying it is. And then I think revenuewise, it kind of substantiates that, that this is not a big factor. So there are other factors in the business, and I honestly believe they're using this as an excuse.

SEANA SMITH: So, Mark, then what are the biggest factors? Because it is clear from the recent reports that Facebook's core business, its advertising business, is continuing to slow.

MARK DOUGLAS: Yeah, I think the biggest factor they have is essentially the quality of their data. So when you are a active Facebook user and you're posting, basically those posts tell Facebook more about you than if you're just browsing Instagram and posting photos. And so I think the quality of Facebook data is declining, which means the effectiveness of their ad business is going to decline over time also, and so that is reducing the margin of error in their business. And it may be Apple had a 1% effect on their business, but they shouldn't be running that close to the sun in terms of running the business and being able to hit the forecasts that people expect.

ADAM SHAPIRO: Mark, if it really is just as simple as fewer people posting things on Facebook, whether they be teenagers or 50-somethings, they are still a juggernaut. I mean, the revenue of fourth-quarter expectation, $31 and 1/2 to $34 billion, is still, to quote the teenagers, ginormous, isn't it?

MARK DOUGLAS: Yeah, I mean, the business is huge. There's no doubt. To keep in mind, Facebook is a direct-response advertising company, right, with content that they get from their users. And so all direct-response advertisers use Facebook in order to drive traffic. They use paid search. We're in that market with our Performance TV solution.

But that's really what Facebook's doing, and, yeah, there's not another solution that's going to give you that kind of scale as an investor, you know, to invest in the business that's doing almost $30 billion a quarter in revenue.

So I think the miss is real, and maybe people need to set their expectations a little lower. But this change by Apple is not having-- you know, it's not wreaking havoc on Facebook's business. And, you know, I don't think-- I honestly think Facebook's using it as an excuse for, like I said, reductions in the quality of their data and other things that could erode the business over time.

SEANA SMITH: Mark, well, something that Facebook clearly is focusing on going forward, they mentioned this new reporting structure. We know Mark Zuckerberg is very bullish on this whole metaverse and this virtual-reality part of the business that Facebook has going on. Do you think Zuckerberg's trying to shift the company's focus with this new breakout structure, and I guess how successful do you see this potentially being?

MARK DOUGLAS: Well, I mean, clearly what they want to do is they want to create a new platform that re-energize engagement on their apps. Instagram obviously has a lot of engagement. Facebook's engagement, although they have a lot of active users, I think it's clear that the age of those users and also the amount of time spent has declined.

I mean, it has a lot of potential. But I think for most businesses if you came out and you said you were betting your future on something that has zero users and zero revenue, investors would generally be concerned. So people are really betting on the amount of capital Facebook has, the amount of talent they have, and, you know, essentially their determination to make this happen.

Ultimately, consumers are going to decide, and that's entirely unproven at this point, but it has a lot-- has a lot of potential. Consumers want to be entertained on social media. Facebook does that, and now they're bringing out a new way of doing that.

ADAM SHAPIRO: So let's talk about Alphabet because some of us might have an Apple device. We run Safari, but we have Google loaded into it, and yet you've got this new Safari privacy, whatever you want to call it. You expect them to use the same kind of excuse we're seeing other tech companies use when it comes to revenue, that blame Apple?

MARK DOUGLAS: Yeah, it goes back to what I said is that Facebook and Google almost uniquely have you logged in on virtually every device you own. And so when you have active logins, real users basically providing a name and password to log into a device, you don't need any other identifier. You know who they are.

And so those kinds of changes can affect a lot of other companies, but they don't affect Facebook and Google. And you can put Apple in that category also, although Apple is neither obviously not in the search business or the social-media business. And so they're--

ADAM SHAPIRO: I want to ask you one--

MARK DOUGLAS: --essentially insulated from those kinds of changes.

ADAM SHAPIRO: Let me ask you this, and it's a little bit side topic. When are we going to finally see digital advertising surpass, if it hasn't already-- it's hard to keep up-- television advertising and the end of TV ads as that juggernaut?

MARK DOUGLAS: Yeah, so it already has. So in terms of the end, that's going to take some-- in linear television, cable television, that's going to take some time. But essentially last year the TV market-- the linear TV market is $182 billion worldwide. Facebook and Google alone are $191 billion. So then you add in Amazon. You add in my company, MNTN. You add in Trade Desk, Roku, Hulu.

So digital has already surpassed television, and that's accelerating because roughly a million households a month are cancelling their cable subscriptions. A city the size of Phoenix per month are cancelling cable essentially at the rate people move, and that's an unrelenting change. That's just going to shift more and more advertising spend to digital [AUDIO OUT].

ADAM SHAPIRO: Our apartment in New York City is not the size of Phoenix, but we're one of those families that cut the cable. It's no more cable for us.

Mark Douglas, MNTN CEO, thank you so much for joining us, and good to see--