The reason for the divergence of Facebook and Google stocks is Apple.

• On Thursday, Facebook's stock reached an 18-month low due to a poor revenue forecast, whereas Google experienced only a slight decline from its record close in November.
• Diverging directions were sent to investors by Big Tech companies with very different fourth quarter earnings reports.
• According to a report by MKM Partners' Rohit Kulkarni on Thursday, did the changes in Apple's iOS trigger a market share shift from Facebook to Google? The answer is "Yes, we believe so."

Despite experiencing its largest stock drop in history and reaching an 18-month low, Google continues to perform exceptionally well and has surpassed all of its Big Tech competitors in the past year.

The difference is .

In the U.S., Google and Facebook are the two leading online ad companies, and their stock charts over the past five years have shown similar trends.

Until you hit late 2021.

Mark Zuckerberg's long-standing struggle to control his own destiny began to negatively impact Facebook's financials.

Facebook's apps primarily depend on Apple and Google for distribution. As a result, when Apple modified its privacy policy, restricting app developers' ability to target users, Facebook lost a crucial asset.

Google uses ad targeting to connect marketers with users on many of its properties, but search advertising is particularly valuable because users tend to "self-target" as they type in a search query that accurately reflects their interests at that moment.

Google, the world's most popular operating system, has control over its own targeting policies through its Android platform. Although Google still requires iOS distribution, its relationship with Apple is cozier than Facebook's, with Google paying billions of dollars annually to be the default search engine on Apple's Safari browser.

Facebook is projected to lose $10 billion in revenue this year due to Apple's new App Tracking Transparency (ATT) feature. This is why the company missed its revenue forecast for the first quarter and its stock price dropped 25% on Thursday, reaching its lowest point since August 2020.

Earlier this week, Google reported a 33% increase in ad revenue in the fourth quarter, compared to Facebook's 20%, while analysts predict that Google parent will achieve a 23% gain in the first quarter, while Facebook is projecting only a 3% to 11% expansion.

On Wednesday's conference call with analysts, Meta CFO Dave Wehner stated that Apple's favorable treatment of search over other apps due to the Google deal is driven by an incentive to maintain this policy discrepancy.

Shifting market share

Google is receiving more advertising spending from advertisers who are unable to achieve the desired level of targeting on Facebook.

According to MKM Partners' Rohit Kulkarni, in a report on Thursday, there was a market share shift from Facebook to Google due to changes in Apple iOS. MKM has a buy rating on both stocks.

Facebook's operating chief, Sheryl Sandberg, stated that small and medium-sized businesses are most negatively impacted by Apple's changes, as they heavily rely on personalization and targeting in their advertising efforts.

"This has a greater impact on SMBs, as we can see," she stated.

For a long time, Zuckerberg has been concerned about the possibility of not owning the device or operating system, which limits Facebook's ability to control its own direction and makes it vulnerable to the decisions of other companies. A decade ago, Facebook attempted to create its own phone, but the result was a failure.

In its 2012 IPO prospectus, Facebook stated its risk factors, which were still in the early stages of mobile development for the company.

Our reliance on Facebook's compatibility with widely used mobile operating systems, such as Android and iOS, which we do not manage, could negatively impact our products' performance and user experience if these systems are modified to favor competitive products or reduce our product's functionality.

In 2014, Facebook bought Oculus, a virtual reality headset startup, for $2 billion, with the aim of developing the next generation of hardware and software.

The foundation for Zuckerberg's desired future is that acquisition. Last year, he changed Facebook's name to Meta Platforms. In the earnings report on Thursday, the company revealed that its Reality Labs group, which houses virtual reality development, lost over $10 billion in 2021.

Concerns among investors are justified as Facebook's primary source of revenue is declining, and Apple is exerting pressure in a manner that is causing alarm.

Zuckerberg believes that the solution to his real-world problems lies in the virtual world. He aims to break free from Apple and Google, allowing his company to establish its own set of rules.

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

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