Why a Small iPhone Update Will Disrupt the $300Bn Online Ad Market

Apple will a change in iOS 14 which will require apps to seek permission from users to track their activities.

(Image: Kamran Akhter/The Quint)

A seemingly small change by Apple in its upcoming iOS 14 has sparked off a domino effect that could effectively disrupt the digital advertising market as we know it.

Apple is set to introduce a change in its upcoming operating system which will require apps operating on iPhones to seek permission from users to track their activities across apps.

While tracking of users was happening all this while, and formed the bedrock of internet marketing and targeted advertisements, this was enabled in part by the fact that apps were not required to get users to opt-in and explicitly allow this.

Facebook has led the charge against Apple’s decision to notify users, claiming this move will hurt smaller developers. The advertising technology sector sees this as one that could reshape (for better or worse) the entire online advertising landscape that stands at over $300 billion in 2020, according to industry estimates.

WHAT HAS APPLE DONE?

In June, during the Worldwide Developers Conference (WWDC), Apple announced iOS 14 updates. One of the changes require apps to ask users for permission to collect and share data using Apple’s device identifier.

Apple says this change is simply promoting user privacy. By doing so, the Cupertino-based company has indicated that it wants to hand over greater control to its users in deciding whether apps get to track them and if so, then who gets to track.

However, advertisers, app developers, and giants like Facebook feel the requirement for a user to explicitly give her consent for apps to track her through the crevices of her iPhone is something many are expected to deny.

Till now, iPhone users were opted-in by default to have their activities tracked through a unique device ID called IDFA. This ID is essentially what online advertisers rely on to generate insights about uses in order to serve them with targeted ads.

WHAT IS IDFA & WHY DOES IT MATTER?

At the heart of the issue is a unique code called the IDFA or Identification for Advertisers (known as GAID in Android).

IDFA is a randomly generated ID that Apple assigns to iPhones. Apps can then use those codes to tie together user activity across apps and platforms.

“Knowing your IDFA can help advertisers tell whether their ads are effective, particularly when they’ve shown you the same ad in multiple places,” writes Casey Newton for The Verge.

Paid user acquisition on mobile phones relies heavily on the IDFA. This allows developers to uniquely identify individual users.

“Since Apple introduced the IDFA with iOS 6 in 2012, a slew of tools have been built using it to target, measure, and optimise ad spend at the user level,” writes David Barnard of Revenue Cat, a backend service for subscription-based apps.

“Because of that, paid user acquisition became more reliable, easier to scale, and easier to measure than other forms of marketing. Not easy, but easier,” adds Barnard. That’s why it’s the primary user acquisition channel for many apps.

WHY IS FACEBOOK UNHAPPY?

The simple answer is Facebook and other advertising giants like Google make billions of dollars each year tracing the detailed digital footprints their users leave behind.

Primarily, Facebook uses the IDFA as part of ‘Audience Network’, its own advertising network for app developers. Therefore, Apple’s requirement that developers show you a warning that they are collecting your IDFA is expected to severely affect the viability of Facebook’s Audience Network.

Facebook, in its blog, said it was considering discontinuing their Audience Network tool on iPhones, which thousands of developers put into their apps to serve ads.

Facebook collects data about users from the apps where it serves those ads, which it uses to inform highly tailored targeting throughout its business.

“We expect these changes will disproportionately affect Audience Network given its heavy dependence on app advertising,” Facebook stated in its blog on 26 August.

“Like all ad networks on iOS 14, advertiser ability to accurately target and measure their campaigns on Audience Network will be impacted, and as a result publishers should expect their ability to effectively monetize on Audience Network to decrease.”

Facebook blog, ‘Preparing Our Partners for iOS 14’ (26 Aug)

“Ultimately, despite our best efforts, Apple’s updates may render Audience Network so ineffective on iOS 14 that it may not make sense to offer it on iOS 14,” it added.

DOES IT REALLY PROMOTE PRIVACY OF iPHONE USERS?

A stakeholder in this decision, that affects hundreds of billions of dollars, are the users of Apple’s iPhones. It is in pursuit of protecting their privacy that Apple says it has announced this change to iOS 14.

The question, however, is whether the move genuinely promotes the privacy of users. The answer is yes. It does so by making a seemingly small tweak – switch from requiring users to opt-out of being tracked by default, Apple will now let users opt-in.

In other words, this change gives consumers clear choice if they want to be tracked in order to receive customised and targeted advertising and promotions.

“In the forthcoming version of iOS, Apple is simply switching from an obscure opt-out system for apps that want to track users across the web to an explicit opt-in system. At last! In my view, we should have a law requiring explicit opt-ins for the collection of personal data,” tweeted Walt Mossberg, senior technology journalist.