Apple’s ad privacy change impact shows the power it wields over other industries

- Advertisement -


  • In April, Apple released an update for iPhones that gave users the option of whether or not to block advertisers from using Device IDs.
  • Six months later, it’s clear that most iPhone users have opted out, and a feature called App Tracking Transparency is now posing challenges for companies from Snap to Facebook to Peloton.
  • While the changes have been marketed as a win for users, they are also benefiting Apple’s advertising.

- Advertisement -

The impact of Apple’s privacy change in April is starting to show on other companies’ balance sheets, and it shows Apple has enormous power over industries unrelated to consumer electronics.

- Advertisement -

In April, Apple released an update for iPhones with a new popup asking users if they wanted to allow apps on their phones to target the user for ads. iPhone owners can easily opt-out by tapping the button labeled “Ask App Not to Track.”

Six months later, it became clear that most iPhone users had opted-out, and the feature called App Tracking Transparency (ATT) is now posing challenges for companies ranging from Snap to Facebook to Peloton.

- Advertisement -

The privacy feature has replaced the proxies of many mobile ads, especially those that confirm whether a purchase was made or downloaded.

Facebook’s parent company Meta warned last month that the adoption of the features has hit a “critical mass” and made its ads less effective at targeting attractive potential customers. Facebook said that its revenues would have grown sequentially in the September quarter if Apple hadn’t changed advertising. Instead, it remained flat.

Snap’s stock plunged last month after the sale came to light, which the company blamed on Apple’s privacy changes. Snap CEO Evan Spiegel said the privacy feature continued to pose a risk to the company’s fourth-quarter earnings, and the company said holiday-quarter sales would be about $1.18 billion — compared to $1.36 billion in Wall Street sales. is quite low. Time.

Peloton, which is an advertiser and doesn’t sell ads, said last month that Apple’s privacy feature hurt user growth.

During an interview earlier this week, Apple CEO Tim Cook declined to comment on the feature’s impact on other companies, but said ATT was issued to let users choose what’s on their devices. it happens.

“All we’re doing is putting the power with the user. We’re not making the decision, we’re just prompting them to ask if they want to keep track of all the apps. And, Obviously, many of them are deciding no,” Cooke. said,

Cook said that if app developers have trust from users, a large percentage of them could allow Device ID tracking.

While the changes have been marketed as a win for users, they are also benefiting Apple’s advertising product, Apple Search Ads, which marketers are turning to for mobile ads driving app installations.

“We’ve actually seen a huge increase in Apple search ads market share,” said Shani Rosenfelder, head of content for AppsFlyer, an advertising measurement firm. “They have become the new number one player, and they have surpassed Facebook, which in the past dominated iOS.”

62% of iPhone owners are opting out

It took a few months for advertisers to start seeing the full effects of Apple’s changes as iPhone owners update their software.

The update splits iPhone users into two categories: those who opt-in to device tracking for ads, and those who don’t.

86% of iOS devices are running a recent enough version of the software to be presented with ATT prompts, according to October 1 report From AppsFlyer. Of those who see the pop-up, 38% are opting in, and 62% are opting out.

Users who opt-in have become even more valuable to advertisers, who can use the data they receive to fine-tune campaigns for users who opt-out, Rosenfelder said.

“We see media costs rising, especially for users who have consented to tracking, because they are really valuable,” Rosenfelder said.

Several companies have indicated through their earnings release that the ATT change is affecting them, but they remain optimistic that they can create replacements for Apple or new attribution systems using their own first-party data, and Can tune targeting with the data they have, such as purchase history or similar demographics.

Facebook, Snap and Peloton React

Facebook’s parent company Meta has been vocal about its opposition to the feature, which is sometimes targeted at the social networking company. For example, Cook specifically mentioned Facebook in a tweet Showing a picture of a privacy sign.

Facebook has responded by building its own systems inside the apps it makes, such as the ability to purchase products directly from Facebook, thereby reducing the need for third-party tracking.

Facebook CEO Mark Zuckerberg said, “As Apple changes making e-commerce and customer acquisition on the web less effective, solutions that allow large businesses to set up shop inside our apps are increasingly available to them.” will become attractive and important.”

Snap CEO Evan Spiegel previously praised Apple’s approach in an interview, and the company has updated its advertising products to work with Apple’s ATT replacement. But last month, Snap executives said Apple’s replacement for ad measurement, SKAdNetwork, was unreliable.

“Over time, we saw [SKAdNetwork] Snap’s chief business officer Jeremy Gorman said measurement results differ significantly from results seen on other first- and third-party measurement solutions, making Scan unreliable on a stand-alone measurement solution.

Snap is accelerating development of its first-party technology to help its customers, the company said.

Peloton is an example of a company that can no longer acquire customers the same way it did before the change, citing challenges related to Apple’s privacy change. But Peloton also said it believes it can adapt and that its app will continue to be an important way to acquire business customers.

“Like many other direct-to-consumer marketers, we are seeing some disruptive effects as our team adjusts to the new data landscape,” Peloton’s CFO, Jill Woodworth, said earlier this month.

how apple benefits

ATT has drawn attention to Apple’s advertising business, which focuses exclusively on mobile ads for apps. Apple’s most notable advertising product is Apple Search Ads. This allows developers to purchase keywords to appear at the top of searches on the Apple App Store.

Apple doesn’t break out search ads into its financial results, but it is a small part of its services business, which generated $68.43 billion in revenue in the company’s fiscal year 2021, a 27% increase.

Bernstein analyst Tony Sacconaghi estimated in a note to clients last week that Apple’s search ads make $4 billion a year and that apps on the iPhone account for 60% of search ads market share.

Search ads are only a fraction of the entire mobile advertising market, wrote the Bernstein analyst. They estimate the mobile ad market as a whole is valued at $300 billion a year, and 20% of those ads are for mobile apps, or about $60 billion, with iOS accounting for half of that pie.

Last quarter, Apple reported more than $83 billion in total sales, so even if Apple expanded its advertising business in a big way, it still wouldn’t be a major revenue source for the iPhone maker.

Apple products may be more competitive because they can access targeting data that other advertising companies cannot. Apple’s ATT focuses on limiting data transfer between third parties, which does not apply to Apple’s first-party advertising.

Facebook COO Sheryl Sandberg said in October, “I think our target may be impacted compared to others like Apple who have direct data.”

“We see many opportunities for Apple,” wrote Sacconaghi. “The company will benefit directly from any changes in search by app ad dollar performance as advertisers seek better targeting metrics.”

Challenges can be temporary

For some companies that make money selling ads, such as Facebook or Snap, ATT makes it more difficult to “attribute” purchases to a specific ad or campaign, which allows those companies to charge more and assures advertisers that their budget isn’t being wasted.

Other companies, such as Peloton, use mobile ads to find new customers, particularly for their apps or services, in a process often called user acquisition. Without the belief that these companies or their advertising partners can attribute specific installs, some are realizing that advertising on iPhones to grow their user base is becoming more difficult and less predictable.

Many companies and advertisers affected by Apple’s privacy change believe the challenges will only be temporary. But advertising professionals want Apple to improve its replacement for device identifiers called SKAdNetwork, which Apple attributes more privately. But it also lacks some of the capabilities of older Device ID-based systems.

“SKadNetwork is like that system if you bring an alien down from space, and you’re told we have this thing called marketing attribution, but it’s bad, and we need to change that, can you? I can design something else without knowing anything in the domain space?” said Alex Bauer, head of marketing at app measurement firm, Branch.

While each advertiser may look at different parameters to measure ad effectiveness, SKAdNetwork “requires them to use Apple’s definitive definitions of advertiser success,” said Gorman, Snap CFO. “For example, advertisers are no longer able to understand the impact of their unique campaigns based on the time between viewing an ad and taking an action, or the time taken to view an ad.”

Advertising professionals say Apple’s change is the first step toward a new, more private era of mobile advertising that relies less on individual users’ data, and instead uses advanced statistics to predict the success of ad campaigns. uses.

“Maybe now we’re going back to a world where advertising is less of a science, and now it has to be an art form,” Bauer said.

An Apple spokesperson did not respond to a request for comment.

,

- Advertisement -

Stay on top - Get the daily news in your inbox

DMCA / Correction Notice

Recent Articles

Related Stories

Stay on top - Get the daily news in your inbox