Snapchat's mobile ad network runs into Apple privacy policies that will affect the entire industry
Snapchat’s nascent mobile ad network faces early challenges that could hinder its widespread adoption, including new Apple privacy policies that will make it difficult to run ads across apps with precision targeting and measurement, according to app developers and ad tech insiders.
Beyond Apple’s privacy changes, the ad network delivers less money compared to rival networks and the Snapchat ad format is not always a good fit for other apps, according to two developers familiar with the ad network, who spoke on condition of anonymity.
“Scale is an issue and ad formats are an issue,” says one of the developers. “And now changes with Apple and app privacy could be the straw that breaks the camel’s back.”
A Snapchat spokesman said the ad network is still in the testing phase with a select few partner apps. The network was already being built with privacy in mind, relying on aggregate data without sharing individual user information with outside apps, the spokesman said by email.
Snapchat has been understandably occupied with the ad experience within its own app, where it reaches 238 million daily active users and generated $454 million in the second quarter, an increase of 17 percent year over year. The audience network, unveiled at last year’s developer summit, is meant to expand the universe where Snapchat ads appear, giving it access to larger audiences to compete with rivals like the Facebook Audience Network.
Apple’s privacy moves will make it harder for all players in the mobile app industry, and there is even a chance for Snapchat to build its platform from the ground up, without relying on highly personal data.
Apple’s privacy changes
In the coming weeks, Apple will update iOS 14 software on iPhones with new privacy controls. Developers will need permission from users to track their activity across apps. Apple sees this as a way to bring transparency to creepy online surveillance, but marketing technology players are worried it will hobble the industry.
“If you take Apple literally, the interpretation is pretty harsh,” says Paul Müller, co-founder and chief technology officer at Adjust, a mobile ad measurement company, referring to the iPhone maker’s privacy update.
Apps will be cut off from Apple’s Identifier for Advertisers, which is key to managing ad campaigns. The Apple ID is used to target ads across apps and measure the success of mobile app campaigns.
“An app can have very good ad inventory, but if it can’t measure if it’s good or not, it’s irrelevant,” Müller says.
“Snapchat can very quickly and easily innovate and build something completely fresh and not suffer under the weight of historical tech infrastructure,” says Charles Manning, CEO of Kochava, a mobile measurement company.
It won’t be easy. The entire ecosystem was developed on the premise that marketers could closely track ad campaigns using tools like the Apple advertising ID. Measurement companies use the IDs to detect when a device saw an ad, and then when that same device took some action in other apps. Marketers have sophisticated programs to measure exactly how much money they can make from every ad dollar spent.
“The whole industry is used to device-by-device attribution,” Manning says. “It’s a big change.”
“If I were a big social media provider that would like an audience network,” Müller says, “I would first wait for the dust to settle to see if everything works on my side.”
Problems with scale
Snapchat is at a disadvantage, because it has fewer direct users on its properties than larger rivals like Facebook, Google and Amazon. That gives it less data to inform ads when bidding on ad space, according to mobile ad tech executives.
“Snapchat is not able to win in a competitive environment off its platform,” says one marketing technology executive, who spoke on condition of anonymity because the company is a partner of Snapchat.
Snapchat does generate less money from its users than rivals. Last week, the company reported second-quarter earnings that showed it makes $3.40 on average daily for each of its North American users. Facebook’s average revenue per user is closer to $35 a day.
When they first came into the market, Snapchat’s vertical video ads were considered almost revolutionary, taking up the whole screen in a way that feels natural on Snapchat. But most mobile app ads are based on standard formats developed by the Interactive Advertising Bureau.
Snap’s Audience Network can power those IAB ads, too, but embracing those standard formats takes some of the novelty out of using a Snapchat ad network, according to mobile ad advertisers.
“Advertising will become more about looking at aggregates, or cohort analysis,” says Kunal Gupta, CEO of Polar, a digital advertising tech company. “It will be more of a predictive model versus a deterministic model for targeting and for attribution.”
“Predictive” is when the marketer makes educated guesses without relying on data gleaned from an individual device. This is exactly the type of system that Snapchat is hoping to implement with its ad network.
In any case, rivals will operate under the same constraints, says Ian Trider, director of RTB platform operations at Centro. Facebook’s ability to target ads and track campaigns are affected by Apple’s privacy rules, too.
“This definitely seriously impairs the possibility of cross-site, audience-based targeting in mobile app environments,” Trider says.