How Apple is changing mobile advertising / ITech content

Contents:

• Why did they do this
• The war against Apple
• What does it look like in practice
• The impact on the advertising market
• What really happened to targeting? Opinions of market participants

In the spring of 2021, Apple introduced iOS 14.5, which was a significant event for marketers. The update introduced changes to privacy settings, prohibiting the collection of user data in apps without their explicit consent. This radically changed the mobile advertising landscape. We will discuss how these changes have affected the market, based on the opinions of experts involved in the sale and purchase of advertising in mobile applications.

• Old scandal: iCloud and Hollywood
• Apple ridicules competitors
• Facebook* against Apple
• New privacy rules in iOS
• How the update affected the advertising market in Russia and around the world

Why they did it

Changing privacy settings in iOS has become a hot topic since 2014. That year, there was a leak of explicit photos of several famous American celebrities, such as Rihanna, Kate Upton and Jennifer Lawrence. The leak occurred as a result of hacking user accounts in the iCloud cloud storage. As a result of the investigation, George Garofano and three other hackers were sentenced to real prison terms. This incident sparked public concern and distrust of Apple's data protection system. In response, the company strengthened its security and privacy measures for user data, prompting users to reconsider their iOS privacy settings.

In 2016, Apple began taking steps to protect user data after incidents of hacked devices. The company introduced the option to completely prohibit app activity tracking. However, to do so, users had to manually go to Settings and disable the feature. Apple subsequently implemented mandatory consent for data collection, which is required upon installation of each app. This innovation significantly increased the level of privacy and security for user information.

To ensure user privacy, the App Tracking Transparency (ATT) framework was developed. When an app is first launched, the user is presented with a window requesting consent for data collection and tracking. This approach allows users to have greater control over their information and increases trust in apps. Consent to data tracking is becoming an important step in complying with privacy regulations and improving user experience.

The new privacy policy was announced in 2020. As part of this initiative, the company launched a comprehensive marketing campaign called "Privacy. It's iPhone." In the ads, Apple criticized its competitors for offering devices with insufficient security, comparing them to people who mindlessly give out their credit card information to strangers. Although one of the ads has been removed, others continue to emphasize the importance of privacy for users.

In 2020, the long-awaited update was never released due to significant resistance from the advertising market. The new privacy settings divided users into two categories: those who agreed to data collection received a unique Apple identifier, the IDFA, which allows tracking devices and collecting information about users. Those who opted out of data collection did not receive an IDFA, making them anonymous to apps. This created problems for advertisers, as they were unable to apply narrow targeting, which in turn reduced developers' ad revenue. As a result, many developers faced the threat of lost revenue, raising concerns about the future of advertising in mobile apps.

War Against Apple

As a result, a veritable PR war erupted, initiated by Facebook. It purchased advertising space in leading American newspapers to criticize Apple's privacy policy changes. The advertising campaign was accompanied by the catchy headline "Against Apple and for small businesses around the world." This situation highlights the growing standoff between tech giants and their influence on small businesses.

The company expressed concerns about lost revenue, emphasizing that the new tracker could lead to developers being forced to create only paid versions of apps. This could also affect blogs and websites that would begin charging users for subscriptions. Thus, this tool could change the business model of many digital services, which would negatively affect the availability of content to a wide audience.

The conflict became so significant that Apple was forced to delay the implementation of new features. The release of a new privacy policy, planned for summer 2020, did not take place. Tim Cook spoke at a conference dedicated to Data Privacy Day, where he responded to criticism from Facebook. He leveled counter-accusations tactfully and carefully, avoiding directly naming the company.

Many continue to ask, "What can we get away with?" instead of the more important question, "What are the consequences?" Using algorithms that fuel conspiracy theories and incite violence to drive engagement can have serious consequences. The Facebook scandals underscore how dangerous such an approach can be.

Facebook's reputation in the US is controversial, not only among users but also among digital marketing companies. One such player is AppsFlyer, a global platform for mobile marketing analytics and attribution. The company's CEO, Oren Kaniel, expressed support for Apple's changes but noted that the use of IDFA could lead to questionable practices. In particular, this concerns the speculation of data for targeted advertising and the sale of customer information. It is important to consider these risks to ensure transparency and security in mobile marketing.

What it looks like in practice

Apple finally presented its solution, releasing new features in April of this year with the release of iOS 14.5. Developers were forced to adapt to the new conditions by updating their SDKs and integrating support for the ATT framework. This framework informs users about how their personal data is used, including gender, age, IDFA number, IP address, and other data. The updates implemented in iOS 14.5 significantly changed the approach to the processing of personal information, which is an important step towards ensuring user privacy.

According to the new requirements, app developers must inform users about what data they collect. Without this information, the app will not be able to pass review in the App Store. Mobile developers are required to complete a special questionnaire detailing the data they collect and the purposes for which it will be used. This may include areas such as third-party advertising, analytics, and product personalization. Ensuring transparency in the use of user data is becoming an important aspect that affects the reputation of the application and its success in the market.

When users first log in to the app, they must provide permission to use their personal data. This banner appears for all users and is a mandatory requirement for obtaining an identifier for advertising (IDFA).

To increase the conversion rate to consent Developers use a variety of methods. This can be compared to the process of creating advertising creative—the goal is to convince users to consent to having their data tracked. Using effective strategies and attractive offers helps increase trust and user engagement, which in turn increases the number of consents to data collection.

Apple has offered two alternative tools for working with users who have opted out of tracking. The first is SKAdNetwork. To target ads through this tool, advertisers must create a special identifier that will be transmitted to advertising networks. This identifier is integrated into the app itself. However, it's worth noting that SKAdNetwork collects data in an anonymized format, making it difficult to measure the return on investment (ROI) of advertising campaigns.

IDFV (Identifier for Vendor Functions) is a common identifier for apps owned by a single developer. This method allows identifying users and presenting them with app ads, but only within other apps from the same developer. Using IDFV helps optimize advertising campaigns and improve user engagement, ensuring more targeted product promotion, which ultimately contributes to the effectiveness of marketing strategies.

Impact on the Advertising Market

Western media confirm that the changes made by Apple have had a significant impact on major social networks such as Facebook. According to the Financial Times, the revenue of platforms such as Snap, Facebook, Twitter, and YouTube decreased by $9.85 billion in the second half of 2021 alone. The publication notes that advertisers have begun to reduce their advertising budgets on these networks, switching to Android users and using Apple's own advertising tools, such as Search Ads. This trend highlights the importance of adapting advertising strategies to the changing mobile advertising market.

The Financial Times quotes Mike Woosley, COO of the marketing platform Lotame, as noting that to reach a target audience of 1,000 men, ads need to be shown to 2,000 users. This is because it's impossible to accurately determine which users are men and which are women. Meanwhile, the advertising budget remains at $5 for 2,000 impressions. As a result, advertising costs double, with potential revenue losses of 50 percent.

Apple's update causes legal conflicts Russia, as the ban on data tracking hinders the functioning of the Unified Biometric System, which is being developed by the Central Bank. According to Fyodor Muzalevsky, Director of the Technical Department of RTM Group, half of the time at a recent meeting of the project's working group was devoted to this innovation. The introduction of new Apple features will complicate the identification of devices used by bank fraudsters, which, in turn, will make it more difficult to block such devices and protect user payments.

What Really Happened to Targeting? Market Participants' Opinions

Apple's new policy rules have had a significant impact on Facebook advertising. Concern for user privacy is certainly justified, but this has limited the functionality of Facebook's advertising account. It has now become difficult to effectively target ads to the target audience, as well as to work with audiences similar to existing customers. Difficulties have also arisen in calculating the unit economics of advertising campaigns. These changes require marketers to adapt their strategies and find new approaches to achieve effective results in this changing environment.

Facebook's new policy has led to significant changes in how it collects data through its website pixel. Previously, users could install an unlimited number of pixels, but now they are limited to eight. These changes can significantly impact the effectiveness of advertising campaigns and user behavior analysis, as the pixel limitation reduces the ability to accurately track and optimize.

In our experience, we have observed that these changes have negatively impacted conversion rates, especially in areas where user tracking is performed. We have recorded cost fluctuations of up to 30%, as well as a decrease in the number of purchases and the overall quality of conversions. Furthermore, ad account blocking has become more common. These changes highlight the need to adapt digital marketing strategies to the new conditions.

These negative consequences can be significantly minimized. Based on practical experience, the most effective measures include setting up event prioritization, implementing the Conversion API, and segmenting users on iOS and Android platforms. These approaches optimize processes, increase the accuracy of analytics, and improve user engagement, ultimately contributing to the achievement of business goals.

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Advertising volumes for iOS users have declined, as up to 70% of Apple device owners disable tracking. As a result, advertisers are beginning to actively utilize broad targeting for ad placements. As a result, CPM (cost per thousand impressions) for users who have opted out of tracking has increased. As app developers, we are exploring new monetization formats, including in-app monetization. This approach opens up new revenue opportunities on the iOS platform.

The decline in iOS ad spend is fully offset by the growth of monetization on Android, which has seen a significant increase in revenue this year. However, changes will not bypass Android either. Starting in early 2022, version 12 of the operating system will take into account user tracking preferences. If a user chooses to prohibit tracking, the Google Advertising Identifier (GAID) will not be available to the app developer. This may impact monetization strategies and advertising campaigns in the future, which is important to consider when planning marketing.

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Advertising costs are not directly related to user tracking features in iOS 14.5 and later. The main factor determining the price is the auction. In this situation, strategic approaches to media buying remain unchanged—it is necessary to optimize advertising campaigns to ensure key performance indicators (KPIs) meet established goals. It is important to note that changes in tracking may impact data analysis and targeting settings, so advertisers should adapt their strategies to the new conditions.

Performance media buying requires careful monitoring at all stages of the conversion funnel and cannot be achieved without high-quality tracking. If IDFA tracking is not possible, alternative methods for assessing the effectiveness of advertising investments exist. One such method is SKAdNetwork (SKAN), which is integrated into the Apple iOS operating system. This tool allows you to measure the results of advertising campaigns while ensuring the privacy of user data. Effective use of SKAN helps optimize advertising strategies and increase ROI.

SKAN operates without the use of IDFA or other advertising identifiers and does not require ATT consent. Over time, the industry will adapt to these changes, and new tracking methods will be developed. Progress in this field is inevitable, and we will see innovative approaches to analyzing advertising effectiveness.

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