Apple’s Privacy Update: One More Measurement Challenge For Digital Advertisers

Here are three big assumptions you might have about Apple’s privacy update:

  1. Targeted ads could become a thing of the past
  2. Ad measurement will become increasingly challenging
  3. Organic posts may regain importance

Research shows that most Apple device users are likely to make use of Apple’s privacy update to prevent in-app tracking and personal data collection. How the update will affect digital advertising remains to be seen, especially as the loudest protests are coming from tech giants like Facebook, who may be more concerned about effects on ad revenue.

In June 2021, Apple announced changes in its privacy policy and said the following iOS update would allow users to opt-out of in-app data collection for apps such as Facebook and Instagram. This move followed the emerging trend of increasing privacy demands by consumers looking to prevent marketers from tracking and retargeting ads based on user’s activity. The privacy effort, led by Apple’s changes, essentially blocked the Identifier for Advertisers (IDFA) feature so that their personal usage information is essentially cloaked. According to Tinuiti, 70% of iOS were sharing their IDFA with app publishers before the iOS update. Analysts predicted that IDFA data would likely reduce to 10% to 15% shortly after the implementation of the privacy controls – causing a fundamental shift in digital advertising – rendering targeted ads and lookalike audiences essentially useless.

From the moment the change was announced by Apple, there have been plenty of protests, with internet giants like Facebook arguing that Apple’s privacy update could threaten small businesses and lead to increased paywalls. Let’s take a moment to consider how much of that is true, and how much is hyperbole.

ASSUMPTION 1:
Targeted Ads Could Become a Thing of the Past

The Apple-driven privacy revolution will greatly diminish the effectiveness of traditional targeted advertising. These ads serve as a major revenue source for Google, Facebook, Instagram, and news outlets. This advertising mechanism grew out of the “wild west” of the digital age as marketers looked for ways to capitalize on unprotected user data stored in the browser and website engagement history of users.

Threatening the power and reliability of targeted advertising in the name of consumer privacy has not gone unchallenged by the major players in digital advertising. Silicon Valley giants like Facebook argue that Apple’s privacy update would threaten small businesses, who they claim have benefited from targeting users based on app usage from Apple’s App Store. In a statement released by Facebook, they claim that businesses could potentially lose over 60% of their sales for each dollar spent on ads that are not personalized. MacRumors reported that Facebook’s Chief Financial Officer, David Wehner, said, “We believe the impact of iOS overall as a headwind on our business in 2022 is on the order of $10 billion, so it’s a pretty significant headwind.” 

Commenting on Apple’s decision, Tom Adams, Director of SQAD MediaCosts: Digital said, “For Apple users who opt-in after the update, the value of their data trail will increase significantly as advertisers work to prototype their behavior for use in ad campaigns – and the cost of advertising to them will go up. For marketers, the importance of user permission messaging has also increased significantly: The use of existing first- and second-party datasets may ease the pain for large enterprises such as CPG firms, but for the small business marketer who relies on proximity targeting and other localized data sets, this move by Apple will hurt.”

While Facebook’s main argument that “Small Businesses” would suffer most sounds alarming, the company did not release any data showing the percentage of advertisers using the platform that fit into the “small business” category. What we know for sure is, according to TechJury, Facebook earned $17.44 billion from targeted ad sales in just the first quarter of 2020, and mobile is responsible for 94% of Facebook ads revenue. There is little wonder why Facebook would be so concerned about the impact of Apple’s app privacy changes.

ASSUMPTION 2:
Ad Measurement Will Become Increasingly Challenging

Mobile measurement partners (MMPs) are one group in the industry that relies heavily on IDFA for its measurement and fraud features. Apple is working to help marketers by introducing a substitute, grouping approach to data collection, known as SkAdNetwork. It will enable ad measurement and attribution in a manner that still ensures user privacy, and serves as another offering to assist the ad industry’s ongoing transition to a cookie-less environment. While useful, the amount of data collected by the SKAdNetwork is too limited for MMPs to function as effectively as before, making it more difficult to assess the performance of mobile ad campaigns.

“The SKADNetwork will likely lack the granularity that advertisers desire,” says Tom Adams. “It creates a ‘walled garden,’ limiting interoperability with other widely accepted tracking systems. It is another example of a one-off solution in an increasingly diverse environment that necessitates a widely accepted, if not universal solution.”

It should also be noted that Apple’s privacy update is not the only thing that will affect measurement in today’s digital advertising environment. There are many forces converging on the industry all at the same time, including regulations like the General Data Protection Regulation (GDRP) in Europe, the phasing out of third-party cookies, the ascent of a Universal ID, and the increasing need for interoperability.

ASSUMPTION 3:
Organic Posts May Regain Importance

One of the key impacts of Apple’s privacy updates is how it could make organic posts more relevant again. Marketers may require Facebook and other digital content platforms to alter their algorithms to improve the reach of organic posts and search results. Enhanced organic visibility can play a key role in helping marketers and businesses reach out to their customers despite the new update.

“Requiring digital content platforms to alter their algorithms is unlikely to be a feasible option in the long run,” concluded Tom Adams. “Algorithms are constantly changing and updating to match as closely as possible what users want. It would be more practical to invest in better target audience research so posts match what audiences are organically searching for.”

FINAL THOUGHTS: Too Soon to Tell

According to a survey carried out by eMarketer in 2021, an overwhelming 79% of US Apple device owners are likely to make use of Apple’s privacy update to prevent in-app tracking and personal data collection.

A report by Bloomberg also suggests that Google is exploring similar user privacy features to limit data collection and cross-app tracking in Android devices.

“Consumers are in the driver’s seat on this one,” says Adams. “Apple just followed where the trend was leading. Now it’s up to the rest of the industry to accept the reality of the situation and pivot. The longer companies wait to adjust and innovate to the “new” market realities, the further behind they will slip.”

It appears to be only a matter of time before Google follows Apple into this new world of user privacy, and the rest of the industry gets in line. This means that companies like Facebook may be better served using their time to create innovative new ways to reach targeted consumers, rather than complaining about Apple’s policy. One thing is certain, the advertising platform that can deliver highly targeted ads that maintain user privacy will ultimately win this battle.