Snap is facing a lawsuit from one of its shareholders for allegedly exaggerating how well it could adapt to the privacy updates Apple rolled out earlier this year, Reuters reports.
According to one estimate, the iOS feature has cost Snap, Facebook, Twitter, and YouTube as much as $9.85 billion in lost revenue in the second half of 2021.
Snap, whose profits largely come from selling digital advertising on its popular photo and video app, has been among the hardest hit. The company’s stock plummeted by roughly 25% last month following an unimpressive third-quarter earnings report, which it attributed in part to fallout from Apple’s privacy updates.
The lawsuit, which was filed in the U.S. District Court for the Central District of California, accuses Snap of violating federal securities laws. As cited in the filing, Snap’s chief business officer, Jeremi Gorman, expressed confidence to investors back in February about adapting Snap’s business model to Apple’s then-upcoming policy change.
“Overall, we feel really well prepared for these changes,” he during an earnings call, though he also cautioned that “changes to this ecosystem are usually disruptive and the outcome is uncertain.”
During another earnings call in July, Gorman outlined several new privacy-centric features for advertisers that Snap launched in preparation for Apple’s privacy update, such as Advanced Conversions, which uses cryptographic tech to measure conversion data without identifying individual users.
Black, the investor behind the lawsuit, claims Gorman made several “materially false and/or misleading” statements during this call to paint a brighter picture about the effects of Apple’s new policy when in reality the damage was already beginning to show. The suit argues that “Snap overstated its ability to transition its advertising with Apple’s privacy changes” and “knew of, but downplayed, the risks of the impact that Apple’s privacy changes had on the Company’s advertising business.”
According to the filing, Snap’s shareholders “have suffered significant losses and damages” because of plummeting stock prices as well as Snap’s “wrongful acts and omissions.” Black is seeking “to recover compensable damages” caused by Snap’s alleged violation of federal securities laws, though the filing does not name a precise dollar amount.
Apple’s privacy updates have also dealt a blow to other companies that depend on online advertising to turn a profit. The VP of product marketing at Meta-owned Facebook, Graham Mudd, said in September that the company “expected increased headwinds from platform changes, notably the recent iOS updates, to have a greater impact in the third quarter compared to the second quarter.” Previously, Facebook engaged in a full-blown PR campaign against Apple throughout 2020 and the beginning of this year to try to convince users that having more control over their data is actually a bad thing.