California-based tech company is anticipated to release a revised version of iOS 14 with a feature that provides customers with greater privacy and destroys the digital advertising ecosystem.
Advertising for digital products is anticipated to be shaken up by this move. I’ve listed those who will benefit and others who will be negatively impacted.
Apple is the big winner.
Apple is the clear winner of its upcoming changes, as it gives customers more control over who can track their activity on their iPhones and iPads.
That is a welcome change for many users. Consumers are more aware of how their personal data is exploited, thanks to documentaries like “The Social Dilemma” and Facebook’s 2018 Cambridge Analytica scandal and controversy over misinformation and targeted election ads.
“If you play in Apple’s ecosystem, you play by Apple’s rules,” Daniel Newman, principal analyst at Futurum Research, explained. “They are doing something that the majority of the world will see as positive.”
The change will also benefit Apple’s business.
This tracking is used by many businesses to target app installation ads. These ads are frequently seen on Facebook and Snapchat. Analysts predict that with less data available for targeting, more ad dollars will shift to Apple’s App Store ads.
Advertisers “already spend there, they already have success there, so if they have less ability to target the right users in other apps, they will most likely double down on their ability to target people who are searching in the App Store,” said Nicole Perrin, eMarketer principal analyst of digital advertising at Insider Intelligence.
Google and Amazon have a neutral impact.
Apple’s privacy change may have little impact on Google.
This is due to the fact that the tech behemoth reaches users through a variety of services, including search, Gmail, YouTube, and Google Shopping. That means Google has a plethora of first-party data at its disposal for personalizing ads.
“It won’t surprise me if they can continue to demonstrate to their advertisers that they’re doing at least as well as anyone can under the new circumstances,” Perrin said.
Amazon, with its vast amounts of first-party data, is in a similar position. It is frequently the first port of call for online shoppers.
The e-commerce behemoth also serves ads to users based on the keywords they enter into its app.
“Amazon knows exactly what you buy because they sell it to you,” Newman explained.
Facebook and Snap are losers.
View-through conversions are a metric used by Facebook to determine how frequently a user who sees an ad from a brand makes a purchase from that brand.
“Their network will be impacted beyond Facebook, but they also… have a good amount of first-party data,” said Ron Josey, analyst at JMP Securities.
This means that Facebook is ready to pivot its business.
For example, the company unveiled new features that will enable Facebook and Instagram users to shop within the apps. This enables the social media behemoth to assess the effectiveness of its advertisements for marketers.
Facebook CEO Mark Zuckerberg stated in March that if more retailers sell directly through both social media apps, Apple’s privacy change could be beneficial to business in the long run.
Snap is yet another company that is expected to suffer a setback.
Snap chief financial officer Derek Andersen warned in the company’s fourth-quarter earnings report that the Apple iOS changes will cause disruptions in advertising demand in the period immediately following their implementation.
Though the long-term impact on Snap’s business is unknown, analysts believe the privacy change will not have a long-term impact on the social media company.
This is because the app interacts with users frequently enough to generate the first-party data required for ad targeting. Snap has also stated that it plans to make a long-term push to bring more e-commerce and in-app purchases to Snapchat.
Ad tech companies are losers.
Many ad tech firms rely on tracking to deliver advertisements to the most relevant internet users. Losing that will make their jobs much more difficult.
In its fourth-quarter earnings call, advertising platform Criteo warned analysts that looming privacy changes, including Apple’s privacy update, could cost the company $60 million in 2021.
Meanwhile, PubMatic stated in February that “there is uncertainty surrounding the timing and magnitude of impact from Apple’s elimination of IDFA.” Meanwhile, Unity Software told analysts on its fourth-quarter earnings call that Apple’s change will cost it $30 million, or 3%, in revenue in 2021.
Companies, on the other hand, are adapting. Criteo, for example, has stated that it intends to target users using its own first-party data.
IDFA is unlikely to devastate any of these companies, but they will have to overcome this obstacle.
Potential winners include: Companies that provide connected television services
According to some analysts, as Apple disrupts the mobile advertising ecosystem, connected TV companies—those that deliver advertising via streaming services—may benefit from the change.
This is because these businesses do not rely on Apple’s iOS tracking to deliver targeted advertisements to viewers.
Ad dollars will follow users as they shift their TV viewing habits to streaming services.
According to eMarketer, the U.S. market for connected TV ad spend was more than $9 billion in 2020 and is expected to reach nearly $25 billion by 2024.
Roku, Viant Technology, and Magnite are among the companies that could benefit. Although The Trade Desk has stated that IDFA accounts for 10% of its flow-through advertiser spend, the ad tech company has also been expanding its connected TV business and may benefit from this shift in ad budgets.
Companies that want to be part of the digital advertising ecosystem in the future will have to rely on first-party data to deliver the most personalized ads possible.
“How different participants adapt, innovate, and invest will determine how well they will navigate these changes,” said Daniel Flax, analyst at Neuberger Berman.