Apple’s new privacy rules take a bite out of advertisers
Consumers benefit from new “opt-in” requirement for ad tracking, but major tech firms take a hit
With great fanfare, Apple announced in April a major change to its privacy policy which was greeted with applause by consumers and privacy advocates.
On Apple iPhones, websites which track users across the Internet to target them with advertising could no longer do so without users’ explicit permission.
The default used to be that everybody was tracked whether they had chosen to be or not. Now, Apple was changing the default on its devices, and users were being offered the opportunity to “opt in” if they wished to be tracked.
While most people cheered, advertisers gasped!
It took awhile for the results to become obvious, but they did with a vengeance in late October.
Major companies depending on advertising in the Internet space reported taking a hit to their earnings because so many users failed to “opt in” to be tracked across the web.
Apple’s April 26 announcement of its new policy was a thinly veiled marketing appeal:
“App Tracking Transparency lets you control which apps are allowed to track your activity across other companies’ apps and websites,” says a video ironically posted to YouTube (one of the worst trackers of all). Announcing it’s new feature in a disembodied woman’s voice, she says:
“[T]he new App Tracking Transparency feature gives you a choice. A choice on how your apps use and share your data, data like your age, location, health information, spending habits, and your browsing history to name a few.”
Sounds innocent enough until it reaches this statement: “Some apps have trackers embedded in them that are taking more data than they need, sharing it with third parties like advertisers and data brokers.
“They collect thousands of pieces of information about you to create a digital profile that they sell to others. These third parties use your profile to target you with ads and they can also use it to predict and influence your behaviors and decisions.”
Hopefully, most people had some awareness that their information was being bought and sold on a massive scale, but in case they didn't Apple reminded them.
“At Apple, we believe that you should have the choice. App Tracking Transparency [is] a simple new feature that puts your data back in your control.”
Coverage of the announcement in the news media was ubiquitous, like the April 27 report from CNN Apple's major privacy change is here. What you need to know
“Apple rolled out a major privacy feature on Monday that will allow iOS users to decide how they want their personal data handled — a move that has worried some companies, including Facebook.”
Why pick on Facebook? It may be the worst offender, tracking internet users not only on their own site but across the web – anywhere you see a “Login with Facebook” option or even just a “Like” icon.
“iOS users must now give explicit permission for apps to track their behavior and sell their personal data, such as age, location, spending habits and health information, to advertisers,” CNN reported
An opt-out for tracking has been available for years, but most people don't know about it because it's difficult to access and usually hidden deep inside a dense privacy policy.
“[Apple’s] new App Tracking Transparency feature, … will usher in a wave of privacy awareness, especially as permission requests start coming in from apps people never thought were tracking them,” CNN reported.
“Developers are now required to ask users via a pop-up alert if they can ‘track your activity across other companies' apps and websites.’ ”
If you ever wondered why so many millions of people are willing to spend as much as $900 on the cheapest iPhone – which is functionally almost the same as others for $300 – you could say it is the “privacy premium.”
From the day it invented the category of smartphone, Apple has been able to charge more for its devices because of its devotion to the marketing message of privacy. And it has been undeniably successful.
Speaking June 14 at the annual Apple Worldwide Developers Conference, CEO Tim Cook focused on the new privacy feature with some lofty language.
“At Apple, we believe privacy is a fundamental human right. We work relentlessly to build it into everything we make,” he said.
“And it's fundamental to how we design and engineer every product and service we put into the world.”
Taking a direct dig at Facebook, Cook added: “While others are focused on making customers the product, collecting ever growing amounts of personal information, we've kept the lens focused on how technology can work for people.”
Of course he did not mention it is a major marketing strategy for the company, one that has been successful in making it, at times, the most valuable company in the world.
“[T]hat’s meant introducing countless features that give users transparency and choice over how their data is collected, used and shared,” Cook said.
“You see that with new tools like … App Tracking Transparency, which gives users more information, more choice and greater transparency about how their data is used.
“We know privacy is a priority for our users in Europe, and around the world. It's why we're always striving to set a higher bar with new tools that put people in the driver's seat when it comes to managing their own data.”
On the face of it, this is admirable. Apple has been willing to put its money where is mouth is — as in February 2016 when it took on the FBI over a warrant which would have forced it to crack the encryption on an iPhone. You can still read its Message to our Customers.
Apple won! The FBI withdrew the case.
It did not become apparent for several months after Cook spoke that the changes at Apple would have impacts far beyond the company itself and its customers.
In reporting its quarterly earnings Oct. 21, the “camera” company Snap missed analyst’s expectations by a significant amount – and blamed Apple!
This was reported in Snap says Apple's privacy changes hurt its ad business more than it expected on the site Engadget:
“Snap is finally seeing the effects of Apple’s iOS 14 privacy changes on its ad business and the changes have had a bigger impact than it expected,” the report said.
“The company reported revenue of just over $1 billion for the third-quarter of 2021. But despite that being a new milestone for Snap, it was $3 million shy of what the company had previously estimated. Snap executives said Apple’s iOS changes that make it more difficult for advertisers to track users were largely to blame for the shortfall.”
Company executives were more explicit on their call with analysts as is evident on the earnings call transcript
“Our advertising business was disrupted by changes to iOS and tracking that were broadly rolled out by Apple in June and July,” said CEO Evan Spiegel.
“While we anticipated some degree of business disruption, the new Apple-provided measurement solution did not scale as we had expected, making it more difficult for our advertising partners to measure and manage their ad campaigns for iOS.”
According to Spiegel, advertisers have for a long time now used a set of really sophisticated tools to measure and optimize their campaigns.
“That allows them to test out a bunch of different creative [approaches] and see what's performing more effectively,” Spiegel said on the call. However, “the big change there was that with these new Apple changes, those tools were essentially rendered blind. [W]e really underestimated the tooling changes.”
It’s serious business when those paying for the ads cannot see if they are working – or which ones are working and those that are not.
Also on the call, Jeremi Gorman, Snap’s chief business officer added: “We are continuing to work through the ongoing changes to digital advertising driven by Apple's app tracking transparency framework.
“[T]hese changes have upended many of the industry norms and advertiser behaviors.”
This may have come as a surprise to many Apple users, but for the largest advertising platform in the world it was foreseen more than a year ago.
In August 2020, Facebook knew it was coming!
This was reported Aug. 26, 2020 in Facebook warns developers iOS 14 could sink app ad revenue
“Apple’s upcoming iOS 14 will be a disaster for app developers that rely on Facebook’s ad-tracking tools, the social network is warning.
“That’s because iOS 14 comes with a series of privacy updates meant to make it harder for apps to scoop up personal data without users’ explicit consent. Among the changes: apps need to ask for permission before they collect Apple’s device identifier.
“This identifier, also known as IDFA, is how developers using Facebook’s Audience Network link your Facebook data to an outside app in order to show a targeted ad.”
Indeed it has long been known that Facebook tracks users across the web, not only on its own platform, and that’s how it collects all the detailed data to allow advertisers to finely target their ads to tiny, specific groups of potential customers.
Thus, barley a week after Snap’s earnings miss, Facebook followed suit.
It was reported Oct. 26 in Apple's Privacy Rules to Blame for Facebook's Lower Than Expected Quarterly Growth, Says Zuckerberg
“Starting with iOS 14.5 and all newer versions of iOS and iPadOS, Apple requires that apps ask for users' permission to track them across other apps and websites,” the report on Engadget notes.
Under the App Tracking Transparency (ATT) framework, the latest change gives users a choice on whether they wish to be tracked for ads or other purposes.
“In the weeks leading up to ATT's launch, Facebook was vocal about its displeasure with the change, explicitly framing it as unfavorable for small businesses who use its platform to target customers,” the report said. Indeed, Facebook had been loudly complaining for many months.
“Continuing on its anti-Apple's privacy rules campaign, Facebook CEO Mark Zuckerberg was quick to blame Apple for his company's lower than expected growth in the third quarter of the year.”
Kicking off the earnings call, Zuckerberg said Apple is “negatively affecting” Facebook but that he believes the company will be able to “navigate” the challenges Apple is presenting thanks to its long-term investments….”
Apple's changes, according to Zuckerberg, are making “e-commerce and customer acquisition less effective on the web.”
Facebook's chief operating officer, Sheryl Sandberg, also criticized Apple and its privacy rules, going as far as to claim that the new rules are negatively impacting Facebook while benefiting Apple's own advertising business.
Tech giants’ spat not surprising
It’s ironic but not surprising that the two tech giants are at the loggerheads over the privacy policy.
Their business models are fundamentally different and their interests are aligned in opposite directions.
Apple makes most of its money selling hardware with its proprietary software, chips and strict control over its app store. It makes far less from advertising. For many years it has made privacy a major marketing feature.
Facebook, on the other hand, makes virtually all its money from advertising. It is thus dependent on tracking users all over the Internet to get as much data on each one as possible.
With fewer people “opting in” to be tracked by Facebook and others dependent on it, it was no surprise that they took a hit.
Time will tell whether this is the beginning of a trend but iPhone users can be assured that they are so far the winners in this spat.
I opt-out of EVERYTHING just to be sure!
Apple's advertising that they're the company looking out for your privacy certainly isn't supported by their history. Here's an excerpt from an October 15, 2012, post on Schneier on Security:
Apple Turns on iPhone Tracking in iOS6
This is important:
Previously, Apple had all but disabled tracking of iPhone users by advertisers when it stopped app developers from utilizing Apple mobile device data via UDID, the unique, permanent, non-deletable serial number that previously identified every Apple device.
For the last few months, iPhone users have enjoyed an unusual environment in which advertisers have been largely unable to track and target them in any meaningful way.
In iOS 6, however, tracking is most definitely back on, and it’s more effective than ever, multiple mobile advertising executives familiar with IFA tell us. (Note that Apple doesn’t mention IFA in its iOS 6 launch page).
EDITED TO ADD (10/15): Apple has provided a way to opt out of the targeted ads and also to disable the location information being sent.