Thoughts on Apple

A short guide to potential impacts of iOS 14 to app publishers advertising monetisation and the in-app digital advertising industry

Background

What is an IDFA?

The identifier for advertisers (IDFA) is an Apple unique mobile device number that works similarly to a cookie on desktop. It’s this number the advertising world uses to track, target and attribute users.

What is Limit Ad Tracking (LAT)?

Limit ad tracking (LAT) is a relatively new feature on iOS devices that allows users to opt-out of having an IDFA visible to publishers. With this setting enabled, user’s won’t see specific ads targeted at them because the device has no identity.

Why is IDFA so important to the Ad industry?

The IDFA is used to append several personal data points to a person's device (like a cookie on desktop). The entire in-app mobile industry relies on this identifier for targeting, especially in Programmatic advertising. This identifier is how buyers can pick the impressions they want to pay more for, e.g. retargeting a user or targeting a user that fits their audience.

This ability is a core benefit of programmatic advertising and is mostly used in Performance Marketing as IDFA is critical in all campaign attribution in addition to microtargeting.

Most measurement and user-level frequency capping are also calculated using the IDFA so it also affects Brand Advertising but to a slightly lesser extent. Example

Will the IDFA exist for much longer?

In September 2016 Apple released iOS 10 where Limit Ad Tracking was added to iOS settings and easily accessible to users to activate. Since then the rumours circulating that Apple have wanted to eliminate the IDFA increased significantly.

This follows a similar strategy Apple used for eliminating cookies on Desktop. Apple's Safari killed off 3rd party tracking cookies in 2017, and Google's Chrome aims to by 2022. 

Considering historical trends, it is fair to assume that at some point Google will follow Apple with their own version on Limit Ad Tracking with high adoption. With this in mind it is likely IDFA will cease to exist in the near future, possibly even as soon as 2022.

What did Apple announce?

Release info here and here

Apple announced at WWDC the following will release with iOS 14 due to launch September 2020:

App tracking controls and transparency

Apps now require to get consent before tracking, so users can choose which apps have permission to track. All permissions can be easily controlled by users in Settings. 

Privacy information on the App Store

A new section of the App Store dedicated to a summary of the privacy practices of an app. Developers self-report their privacy practices, including data collected by the developer and used to track you across companies, in a simple, easy-to-read format.

Upgrade to Sign in with Apple

Sign in with Apple creates a random email address that forwards to your email. It already exists for new account setup that is secure for users and passes no data. The option to change existing account logins to Apple will be added with iOS 14.

Approximate location

A new setting that allows user to share an approximate location with a 10 mile radius, rather than precise location.

What's the impact of iOS 14?

The main impact of iOS14's new features on advertising will make it very easy for users to opt-out of being tracked for advertising. The option will be presented by Apple (not the developer) when the developer wants to collect IDFA (aka Device ID) and will likely see adoption of over 80%. This will essentially see the death of the IDFA in iOS devices and long-term Google will likely follow suit with their AAID. On release, September, iOS 14 will likely have fast adoption and be as high as 70% within 3 months. Here are my thoughts on how it'll impact App Publishers that monetise with advertising and the buy-side.

Impact to App Publishers

App Publisher Data to be negatively affected:

• Sharp increases of Limited Ad Tracking users without IDFA (80% iOS)
• Internal tracking for most will be significantly affected without ability to use IDFA
• Data collection of 1st party data segments likely affected negatively if they need IDFA
• Urgent need for user login/profiles for more data points than IDFA to identify users

Direct IO Sales mostly positively affected:

• No impact to Brand Safety or Viewability
• Contextual targeting (publisher focused on one specific topic/area) likely to become more valuable
• 1st party data likely to become more valuable as long as internally not dependent on IDFA
• Brand Uplift studies may be negatively affected

Direct Sales PG/PMP may be severely negatively impacted:

• Some benefits of PMP and PG to be lost so expect industry usage growth to slow
• Advertisers won't be able to pick and choose the impressions as effectively, e.g. users who don't have app installed and may impact frequency capping 
• Advertiser side data may not work on many impressions in market so PMP/PG value decreased
• Contextual relevant & 1st party data rich app publisher may have more PMP's instead of buying via Open Marketplace

Open Marketplace revenue will likely be negatively impacted:

• Industry decreases in eCPM will knock onto publishers
• Facebook Audience Network & Google revenue could be negatively affected unless both work out a way to transfer data between publisher and them without IDFA (likely they will work it out)
• Header Bidding/Unified Auction may suffer without IDFA and CPM's decline

App Publisher monetisation strategies will change:

• Direct sales teams will likely shift to selling more Brand Advertising and push non-programmatic revenue streams more
• Small handful of publishers may try and become Device ID-free to get ahead of the inevitable
• Subscription and IAP monetisation will increase significantly as publishers take other revenue streams more seriously, e.g. Ad-Free, Premium-access etc.

Impact to in-app advertising industry

In-house Performance Marketing operations negatively affected:

• Broad marketplace impacts to Attribution platforms (Appsflyer/Adjust) and Ad providers (Ironsource, Applovin) may severely affect many UA operations, specifically game marketers
• Adoption of Apple SKAdNetwork will result in probabilistic attribution models and deterministic attribution will eventually die out
• Influencer based marketing will not be affected 
• More detailed breakdown

Ad Agencies and Media Buying will need to change significantly:

• Reduction of 3rd party targeting segments across the entire in-app industry
• Significant negative impact to attribution models, will shift from Deterministic to Probabilistic 
• Potentially significant slow of growth of Open Marketplace
• Programmatic media buying will become less effective
• Slowing growth of PG deals
• PMP growth may slow, but due to Open Marketplace decline may also increase
• Negative impact possible to measurement: Audience Guarantee and Brand Uplift
• Publishers focused on Brand Advertising likely to benefit from increased budgets
• 1st party data will become significantly more valuable
• Contextual targeting will become more valuable
• Logged in users will be significantly more valuable, providing other attribution data points
• If FB and Google work out solutions to not needing IDFA then they will be stronger than ever and receive even more budget

AdTech companies and Mobile App publishers will broadly be affected negatively:

• Re-targeting DSP's are in real trouble and some will go bankrupt
• Mobile data AdTech middlemen will struggle to survive
• Significant negative impact to managed DSP's
• Facebook and Google slightly negatively impacted from Sign In with Apple, but likely mostly unaffected due to plethora of user level data points for identification
• More app publishers exit advertising and/or introduce subscription models and other in-app purchases
• Smart app publishers will be working on enriching and improving their first-party data linked to login

Recommendations to App Publishers

1) User login and 1st Party Data

Get your users to login your app, especially if you offer any kind of personalisation and make sure you're explicit with what data you're collecting from them and why it's beneficial to them (and you).

Make sure your onboarding experience to create an account is incredible and well timed with reminders that aren't too annoying but also give you good coverage.

Decide what login method is best for you, your own email sign up, Facebook login (provides additional data), Google (provides additional data) or even Apple (no additional data). I'd recommend using Sign in with Apple just so you're ahead for the long term.

2) Be privacy-first 

With Device ID eventually becoming a thing of the past you'll want to try and create a business with no Device ID usage at all. After all, if we all work out a way around not having a Device ID but get the same functionality Apple could just move the goals posts. So the best long term thing to do in my opinion is to have a privacy-first approach, go over and beyond to be privacy-centric.

3) Prepare for revenue hit and mitigate where possible

Most ad-funded businesses will see a revenue decline after iOS 14, especially if there are more announcements from Google (and maybe even Apple) on in-app advertising. So be prepared for a drop and hopefully it's not as bad as I forecast. 

Evaluate all parts of your business that could be impacted by stream and see what you can do stream by stream to mitigate, e.g. moving some clients to buying differently, or talking to tech partners ahead of time.

4) Create non-Ad revenue streams

See if you can create a subscription bundle, work out what additional value you can offer to your consumers and be thoughtful, even things like "early access" and custom app icon badges can be valuable to your most loyal users. Subscriptions can be incredibly lucrative and yield significantly more revenue, recurring, than Ad ARPU.

If you have one already, revisit your offering, can you make it better, can you tier it, can you push it more in-app with CRM or House Ads? Remember, the app store tax cuts ot 15% for renewed subscriptions (instead of 30%). Things like "Ad-Free" or "Premium" are great examples. 

Very similar to subscription, see if you can offer more one-off in-app purchases (IAP) and offer them in the app for things users value.

5) Keep your AdTech up to date

Review your AdTech, is it operating as efficiently as possible. Is your latency good, what about show rate, are your impressions bouncing round networks inefficiently, have you adopted unified auctions, is your Ad Server setup the best it could be, do you have a good Ad Server and good SSP's? Can you offer advertisers great service regardless of how they buy (IO, PG, PD, PMP, OE).

Keeping your AdTech up to date will help you feel less pinch long term!

My personal view: is it good?

The simple answer is, yes.

Broadly speaking this is a much-needed update to the industry that will have long term benefits to consumer privacy as well as the business models and strategies in place currently.

Apple's move was long rumoured but there are two camps of thought.

The cynical views is that:

• Apple Search Ads has no IDFA attribution or targeting outside keyword (not even Age & Gender!), this will strengthen their proposition on an already >$1b business
• Apple makes $b's through IAP but nothing through Ads, this is Apple's way to reduce advertising spend in mobile and/or get a cut of the pie 
• Apple just wants to hurt its main silicon valley competitors: Google and Facebook

The optimist view is that:

• Apple cares about privacy and as gatekeeper can use its role to protect consumers
• The lack of regulation in digital advertising has encouraged sneaky and abusive practices and Apple is stepping in to "do the right thing" 

The truth is perhaps somewhere in the middle, but I personally view this as a net positive to the advertising industry. We've become addicted to data in a way that accidentally promotes bad practices at the cost to the user. This levels the playing field and actually helps businesses like ours who have a great sales team selling great Brand experiences with contextual relevance. 

Other Resources/Articles

Apple - release notes on iOS 14

Mobiledevmemo - Apple killed the IDFA: A comprehensive guide to the future of mobile marketing

Forbes - Apple just crippled IDFA, sending an $80 billion industry into upheaval

Wired - Apple pushes back against ad tracking in Safari and iOS14

Digiday - Ad tech insiders expect Apple to eliminate a key mobile ad targeting feature

Mobiledevmemo - Apocalypse Now: per WWDC, the IDFA is dead

PPC Land - Apple introduces a compulsory consent manager for all apps with ads

TechCrunch - Apple's iOS 14 will give users the option to decline app ad tracking

Adjust - Mobile measurement in iOS 14: Four possible scenarios

Soomla - IDFA-14 - The impact on Ad LTV and Ad-monetisation

This is actually a summary of a much longer piece, message me directly if you want to link to the full thing!