Apple hit the reset button on app marketing with the rollout of iOS 14.5 and its new privacy update. Unfortunately, it commenced the devaluation of the iOS Users’ Identifier for Advertisers (IDFA), sending an $80 billion industry into a tizzy. While the ad tech industry struggled to make sense of it, Apple did delay the enforcement of the most significant change in the mobile app advertising ecosystem in recent times.
In a two-part series, we deconstruct this monumental privacy update that has brought about a significant change in the mobile app ecosystem and importantly analyse its implications on marketers.
So far, IDFA or the Identifier for Advertisers was an innocuous tracking technology, hardly a candidate for causing an upheaval in the advertising and gaming ecosystem, yet that’s what it has turned out to be!
Simply put, think of IDFA as a mobile version of a web cookie. It is a combination of letters and numbers designed to identify a specific iOS device. It profiles a user (albeit anonymously) and allows marketers to target advertising to a particular set of users at scale and measure those targeted ads’ performance. So even though the IDFA doesn’t provide information such as the Apple user’s name or address, it allows a marketer to check information such as how often they visit your site, which ad networks they frequent, and enables you to retarget them elsewhere.
It’s no surprise that it was powering the entire iOS advertising industry through:
- User tracking and marketing measurement
- Ad targeting and monetisation
- Programmatic advertising
- Retargeting, and more
While IDFA was so far “opt-in” by default, with iOS14, IDFA has become “opt-out” by default. Apps will now need to gain explicit consent from users to allow them to be tracked and attributed. Apple describes its IDFA changes as App Tracking Transparency (ATT), giving users the option of not sharing their personal data.
While Apple’s overt plan was to enhance user privacy, it isn’t difficult to see how the update makes it harder for advertisers to track users across apps and services and tie ad impressions to installs and revenue. Moreover, the problem is a compounder since iOS accounts for a disproportionate share in ad revenues, and the latest update negatively impacts this large chunk of advertising revenues.
In the absence of IDFA, Apple has updated its SKAd Network, a privacy-centric, aggregated attribution platform. However, with SKAd, the granularity of data is limited, as among other things it:
- Does not offer device-level data
- Does not offer creative-level data
- Offers only 24 hours of post-install conversion data unless you update the conversion time
Additionally, it does not offer retargeting or look-alike campaigns.
Advertisers, therefore, are now faced with a high level of complexity created by part IDFA views, the limitations of the SKAdNetwork, and more.
The User Journey
It will be worthwhile to understand the user journey in an ATT world. Essentially, each user is presented with the App Tracking Transparency (ATT) pop-up asking whether they want to be tracked by the app. If they do not give consent, the app will not be able to access the IDFA. Apple App Store will remove the apps that do not present the ATT pop-up and still track users.
The jury is still out on the importance of the changes brought about by Apple. While Apple insists it has done this purely for privacy reasons, a section believes that it is more a PR exercise that allows Apple to take the high moral ground on privacy while also trying to get a degree of merchandising control over app distribution. While Apple’s Craig Federighi criticised the ad tech industry for: “infiltrating the most intimate parts of your life and exploit whatever they can find — whether to sell you something, to radicalise your views, or worse.” On the other hand, prominent players such as Facebook criticised Apple’s position on account of the hurt it would bring to revenues. In fact, ad tech companies even went ahead and formed the Post-IDFA Alliance to address many of their concerns. Amidst the two camps, one which applauds the privacy-focused policies and the other sceptical of it, it will be worth looking at some early uptake data.
Early Numbers and Impact
Early estimates on how many people will “opt-in” varied from about as low as 5% to as high as 30%. App Flyer’s preliminary insights from 550 apps peg the numbers at 26% average per app. Opt-in rates also vary by industry and product type- understandably so, with apps looking to use more personal data and experiencing a lower-than-average opt-in rate. Experts, therefore, feel that given these numbers, the impact can roll back advertising efficiency by decades. It will be worthwhile to examine the many implications for marketers.
Difficult to undertake performance marketing
While, unlike legacy advertising, digital offered real-time, hyper-targeted advertising, the post IDFA world tends to threaten this consumer data-rich approach. If anything, performance from mobile advertising on iOS14 is expected to look dramatically worse. Little surprise then that the Post-IDFA alliance partners reported an increase in Android spends in the two weeks following the release of iOS14.5.
Also, while mobile marketers have looked at digital advertising as a direct response to sales activation channels in the absence of tracking mechanisms, the ability to justify campaigns on media efficiency metrics has significantly reduced. Therefore, it may force mobile advertisers to target broader audiences who do not have an apparent need or want for the product or app or look at mobile phones for brand advertising, which typically has not been the trend.
Impact on CPMs
Early data shows that CPMs for opted-out iOS 14.5 users are much lower than CPMs for opted-in users, as predicted. Ad rates for impressions without the mobile identifier have fallen anywhere between 35% and 50% as per different industry estimates. However, the low rates come with the fact that marketers do not value this identifier-less traffic. Also, with no view-through attribution, trackable performance from mobile advertising appears worse. On the other hand, forecasts from InMobi estimates suggest a cost appreciation of up to 50% for the valuable impressions from the IDFA identifiers.
Impact on Small and Medium Businesses
Small and medium businesses have effectively used targeted advertising on social media, particularly Facebook advertising, and reported significant gains. However, these small players find themselves in a tough spot in the absence of other resources to lean back on. As a result, acquisition and retargeting become that much more challenging, impacting such businesses dramatically. Unsurprisingly, Apple’s privacy change is estimated to cost Facebook, Google as much as $25 Billion in revenues in the first year.
Is it Doomsday yet?
Marketers may interpret the change as impending doomsday. The silver lining is that not all is lost, and there is still hope. We may rue the loss of being good at our jobs (with large advertising platforms no longer offering low CPMs). However, more than enough courses of action are available to transform digital marketing efforts and reap rich benefits. Right from creative optimisation to better behavioural context, there are ways to survive and thrive in the post IDFA world. Watch out for this space for more on these strategies in our next post.