Apple's privacy changes represent 'tectonic shift' for digital ad industry

Apple announced new privacy changes to its upcoming iOS 14 software that will significantly hinder how media buyers and brands target, measure and find consumers. One change will make it harder for apps to track iOS users across different apps and websites. Another will make attribution—determining which tactics contribute to sales or conversions—harder for marketers. The changes, announced Monday at Apple’s Worldwide Developers Conference, apply to the company’s Identifier for Advertisers (IDFA), which assigns a unique number to a user's mobile device. Advertisers have access to the feature and use it in areas including ad targeting, building lookalike audiences, attribution and encouraging consumers to download apps. IDFA is shared with app makers and advertisers by default, but that will change once iOS 14 rolls out this fall. Then, users must give explicit permission through a popup for app publishers to track them across different apps and websites, or to share that information with third parties. “This is a tectonic shift in the industry,” says Gadi Eliashiv, CEO at Singular, a mobile marketing intelligence company. “Some business models will be completely disrupted, while others will have to be completely reinvented.” Apple didn’t kill its Indentifier for Advertisers, but rendered it useless, Eliashiv says. “It’s unlikely many consumers will say ‘yes’ to tracking when asked and, even if they do, saying ‘yes’ on one app is not enough. You also need to say ‘yes’ on all the other apps you’re seeing ads on for IDFA to be useful for attribution, retargeting, look-alike audiences and many other mobile measurement requirements,” he says. Apple’s changes tie into earlier privacy efforts it made with Intelligent Tracking Prevention for its Safari browser. However, the demise of IDFA might have a larger impact on the marketing industry than the end of third-party cookies, which apply only to desktop browsers. Apple’s identifiers, however, apply to the mobile arena—where marketers sent $87 billion, or 70 percent of all U.S. digital ad spend, in 2019. Mark Wagman, managing director at MediaLink, says he’s heard from large clients who are grappling with privacy issues on multiple fronts. “What’s top-of-mind for a brand right now is they are reading this news about Apple and compounding it with Google’s depreciation of the third-party cookie and California’s Consumer Privacy Act, which begins enforcement July 1,” says Wagman. Wagman suggests advertisers assess spending as they attempt to get a handle on consumer privacy. “So many businesses are built on complex data-driven flywheels, small changes along the way cause big headaches,” he says. “This summer is the time to pause and think about your data and partnership strategies. We have certainly overcomplicated the market.” Trade groups respond Apple’s announcement drew criticism from both the Association of National Advertisers and the American Association of Advertising Agencies (4A’s). In a joint statement today, the groups said that “Apple’s actions appear to continue a damaging pattern that began with its Safari web browser and will now extend to its mobile app ecosystem.” Both groups said the changes will impact publishers and mobile app developers, adding that ad personalization, measurement and other capabilities that marketers require to reach consumers will “cease to function.” “Advertising revenue funds vital news-gathering and reporting and supports the development of innovative products and services,” said Alison Pepper, exec VP of government relations at the 4A’s. “Cutting off this critical income stream for mobile app publishers and developers will hurt an already struggling news industry and countless small businesses and developers who will be forced to find new sources of revenue to fund their operations in order to survive.” The Interactive Advertising Bureau’s Tech Lab acknowledged Apple's intentions. “By moving IDFA to ‘opt-in’ and announcing other privacy-related changes, Apple apparently aims to educate users and offer choices, instead of making decisions for them,” Dennis Buchheim, president of the Interactive Advertising Bureau Tech Lab, told Ad Age. “But they’re still taking an entirely proprietary approach, and consumers need predictable privacy across all experiences, operating systems, and browsers—which necessitates open standards.” Impact on targeting The IDFA feature is essentially a way for advertisers to target Apple users and measure engagement, says Brian DeCicco, exec director of customer strategy at Mindshare. “What IDFA can do for marketers is twofold,” says DeCicco. “It can determine which actions a user takes in an app and connect those actions to an IDFA profile.” The second, DeCicco says, allows marketers to capture consumer interaction with digital ads and attach it to an IDFA. “This helps you understand engagement and measure performance of an ad campaign,” he says. The changes to IDFA will impact even some of the largest ad platforms. Facebook, for instance, is widely regarded as among the biggest and best when it comes to getting consumers to install apps. The company offers two technologies—App Event Optimization (AEO) and Value Optimizations (VO)—for finding new users for mobile marketers. Without IDFA, however, brands will face an uphill battle acquiring iOS users through AEO and VO technologies—something Facebook has built into a multi-billion dollar business, according to one person with knowledge of the matter. “Will those specific product lines have an impact on Facebook? Yes, [IDFA changes] will have an impact,” says Wagman, the MediaLink exec. Direct-to-consumer brands hoping to go from being the 400th most popular app to the 25th will use AEO and VO to capture that growth, according to Wagman. “Or it is a tactic agencies will use to drive more downloads for the Home Depot app, [for example]” he says. A Facebook spokeswoman told Ad Age in an emailed statement that it's working with its partners to better understand Apple’s latest updates and how they affect businesses and people. “We share the industry’s desire for more transparency and controls in the way ads run online, while ensuring personalized advertising continues to deliver value to both people and businesses,” Facebook said. Road ahead Many industry executives believe Google will adopt a similar approach within the next 18 to 36 months. The search giant, for instance, is following Apple’s lead after it eliminated third-party cookies from its Safari browser. “Apple is consistently ahead of Google on privacy and transparency issues,” says Lance Porigow, chief marketing officer at digital agency The Shipyard. “Each focuses on what’s best for their audience and Apple is in the service of selling consumers elegant technology, whereas Google is mostly selling advertising to marketers.” “Eventually, Google will follow suit, but it will likely drag its feet for as long as possible,” Porigow adds. Nickolas Rekeda, chief marketing officer at MGID, a company that provides native advertising solutions, suggests that Apple is laying the groundwork for its own advertising business—one that is built from the ground up with the consumer in mind. “Apple is now trying to draw ad budgets from app developers like Admob and Facebook Audience Network to its Apple Store Ads, but since the company has no in-app monetization solution of its own, the revenues won’t be significant,” says Rekeda. “This could be another step toward the launch of Apple's own monetization platform.” Others see opportunity given all the privacy changes. Jarrod Dicker, head of tech and commercial development at the Washington Post, says the company has developed its own tech so it’s not reliant on things such as IDFA or third party cookies. Ads that run across the Washington Post’s app and in Apple News rely on “advanced contextual targeting,” according to Dicker, technology that his team built. The company licenses its tech, called Zeus, to other publishers such as The Dallas Morning News and MccLatchy News. “We saw this as an opportunity for us to go outside of a media company as a technology company to build for the future based on what we were seeing across the browsers and platforms to not just maintain our business, but grow it,” says Dicker.

Apple's privacy changes represent 'tectonic shift' for digital ad industry

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