Last June, advertisers were dealt a major shock when Apple announced it would be implementing new rules for the use of IDFA, rules which would have a significant impact on the entire mobile advertising ecosystem. What were Apple’s motivations for taking such a revolutionary step, and what does it mean for the future of the advertising industry, particularly with regard to publishers? Moreover, will Facebook’s attempt to sway public opinion against Apple by being the supposed champion of small businesses be successful?
The third question, at least, can be answered in a single word: no. Over recent years, Apple has consistently presented itself and its business model in direct opposition to Facebook’s. The company has highlighted, time and time again, its commitment to user privacy, whereas Facebook has been the subject of one privacy scandal after another. One could also argue that Apple’s decision to ban third-party cookies on Safari is what made the cookie-less future possible – or at the very least, brought it about sooner. All this is to say that Apple’s new rules regarding the use of mobile IDs and the need for users to opt-in to allow data tracking are firmly in line with pro-privacy stances the company has taken in the past, and are unlikely to be changed no matter how loudly Facebook objects.
To return to the first question posed at the beginning of this article, what exactly does Apple get out of this? Yes, the company can further burnish their reputation as the protector of user data, but what other reasons might there be for such a move? Is it in fact in Apple’s financial interest to potentially make mobile advertising more difficult to conduct and measure?
There is no question that these new rules benefit users, but it is also necessary to assess the impact on the entire mobile advertising ecosystem and the hundreds of thousands of jobs at stake. For brands who rely on mobile IDs to learn more about their customers’ behaviors and determine the most relevant place to target new customers, the opt in-only IDFA makes it virtually impossible for them to achieve the same level of targeting and personalization that they have come to expect. Moreover, as these rules come closer to being implemented, advertisers have been given little guidance from Apple about what they would have to do to remain compliant, with one survey finding that 37% of marketers have a limited understanding or no understanding whatsoever about the new IDFA requirements. Almost all of the content that is available online, is available for free or without a login, and that content is paid for by advertisers who need mobile targeted advertising based on IDFA. Publishers will lose millions, if not billions of dollars unless an alternative is presented.
Once marketers no longer have consistent access to mobile IDs, they will need to shift to a contextual marketing model, in essence using context clues to make guesses about where their target consumers are likely to be (for example, a company selling luggage might be best served by partnering with travel sites). Publishers in turn will have to use the data they have on user activity and preferences to build a better understanding of their user base, and to prove to advertisers that they can deliver the desired audiences. This is unlikely because this is a return to a time before programmatic advertising, when publishers struggled to sell more than 50% of their advertising. Marketers have known for decades that contextual advertising is helpful when considering a brand halo effect for their brand, but to drive sales it does not add value unless the content is far down the funnel, such as a mobile phone review on a tech website.
For larger companies that are able to set up the systems needed to track users within their own platform, the elimination of the IDFA may not be a total apocalypse but only Facebook, Amazon, and Google really qualify on size in this instance. All other publishers will have to spend a significant chunk of resources in order to adapt to a system that, no matter what, leaves them at a significant disadvantage simply because they lack the scale of the walled gardens.
Because mobile IDs enabled advertisers to show relevant ads to their audience members regardless of where those audience members were, it meant that smaller publishers could generate advertising revenue even while lacking the scale of Facebook. In the new system, however, there is limited benefit for advertisers to partner with smaller publishers given the lack of data and smaller reach. This means that smaller apps will have to find a new revenue stream – and in the mobile world, that will most likely come in the form of a subscription. As has been noted, Apple has long encouraged developers to adopt a subscription model for their apps, not only because it allows for a more consistent stream of revenue, but also because the company itself takes a significant cut – 30% of the revenues from subscribers in their first year, and 15% of the revenues from everyone else. To that end, any move that pushes more developers to implement subscriptions will help Apple’s financial prospects.
In a sense, Facebook is right – small businesses will be disproportionately affected by the changes to IDFA, and many will be forced to adjust their revenue models or pay more for advertising. But “small businesses” to Facebook include large publishers like WarnerMedia, The New York Times and Yahoo. Apple’s decision will continue to consolidate spend into what some already consider monopolies.
