25 April 2021 – Tomorrow Apple will release iOS 14.5, flipping the switch on the new privacy moves I’ve been writing about for the last 9 months. IDFA becomes opt-in, meaning you can’t track a user from an ad to the App Store to an app install, and ATT means any app must ask a user to opt in to any in-app tracking or analytics.
IDFA (Identifier for Advertisers) is a unique identifier for mobile devices and is used to target and measure the effectiveness of advertising on a user level across mobile devices.
App Tracking Transparency (ATT) could effectively spell the end of the IDFA.Â
Apple explains it all here.
Together with the Great Cookie Apocalypse, this sets off a bomb under half of the online ad industry, starts a big fight with Facebook (and to a lesser extent Google), causes real problems for any small business trying to advertise, and (like FLoC) raises all sorts of interesting competition issues – especially given Apple runs its own ad business, with user tracking that will remain opt-in (because, like FLoC, it happens on the device) and that apparently it plans to expand.
There is a lot going on here. I just completed a monograph on FLoC for my digital media subscribers and next week I will post a reduced version for my general readers. For this post I’ll summarize my previous musings about Apple.
Apple has been expanding its advertising business, just as it brings in new privacy rules for iPhones that are likely to cripple the ads offered by its rivals, including Facebook. It is just one more element to increase its “services revenue” over its “product revenue”. It already sells search ads for its App Store that allow developers to pay for the top result. In searches for “Twitter”, for example, the first result is currently TikTok.
Apple now plans to add a second advertising slot, in the “suggested” apps section in its App Store search page. This new slot will be rolled out by the end of the month, or beginning of May, and will allow advertisers to promote their apps across the whole network, rather than in response to specific searches. The expansion is the first concrete sign that Apple plans to enhance its own advertising business at the same time as it shakes up the broader $350bn digital ads industry led by Facebook and Google.
Apple’s software update launching tomorrow, iOS 14.5, will ban apps and advertisers from collecting data about iPhone users without their explicit consent. Most users are expected to decline to be tracked, dealing a huge blow to how the mobile advertising industry works. Apple has said the changes will improve the privacy of its users, but some critics have accused the company of hoping to boost its own fledgling advertising business. Mark Zuckerberg said: “Apple may say they’re doing this to help people, but the moves clearly track with their competitive interests”. Pissed off are we, Mark?
Apple has long wanted to be a big player in mobile advertising. In 2010, it paid $275m to acquire Quattro Wireless, a mobile advertising company, after being beaten by Google in the bidding for $750m AdMob. The same year, it launched iAd, a multiyear effort to build an advertising business. At launch, iAd had a minimum contract price of $1m, but within a year it had cut the requirement by half. Apple tried to maintain creative control of ads and was reticent to share user data with marketers. Two years later Apple cut the minimum contract to just $50 and the whole effort was shut down in early 2016.
Meanwhile, the market for online advertising has boomed, with annual sales of $378bn, according to the market research group Insider Intelligence. Google and Facebook are the two biggest players in the market, but Tim Cook has repeatedly attacked their business models as unsustainable because of how they accumulate large troves of data to target their ads. If you spend some time with Apple’s 10Ks you can estimate that Apple currently earns around $2bn a year from search ads in the App Store, with 80 per cent margins. Apple also sells ads in its Stocks and News apps.
A second advertising slot in the App Store is likely to appeal to advertisers after the iPhone’s privacy changes reduce the effectiveness of targeted ads. But there is more than money at stake. A decade ago, the App Store played a critical role in how consumers discovered new content. Apple used to be king maker – if you got featured, your company valuation might increase by a hundred million dollars.
Clearly Apple now wishes to regain this level of control. If Apple cripples mobile advertising, then the App Store becomes the primary discovery point for apps again, and Apple decides how people use their iPhones, and Apple decides which apps are the most popular.
Get out the 🍿.