Apple’s Identifier for Advertisers (IDFA) is under fire as two new complaints have been filed from the European privacy campaign. The company’s setting of the IDFA breaches regional privacy laws on digital tracking because iOS users are not asked for their consent for the identifier’s initial storage.
With changes looming, actors across numerous industries now wonder where new updates will leave them. This is perhaps no more true than in advertising and the ad tech space, as there is an undeniable direct impact. Below we explore what the IDFA is, why changes are happening, how they will alter the digital landscape, and what all this means for ad tech.
What Is the IDFA?
The IDFA is Apple’s way of assigning a unique code to each user in order to track their behavior and responses to advertising campaigns. Essentially, it allows advertisers and Apple to track how consumers interact with apps and ads in order to deliver a personalized advertising experience.
Those in the ad tech industry can use the data to make informed decisions as well as identify high performing ad campaigns. At the same time, IDFA allows them to see which users interact successfully with their campaigns and how they do so. By tracking individual activity across different apps, advertisers can also better understand their campaigns through a single user.
How and Why Things Are Changing
While the IDFA always had the option to have users opt-out, Apple is watching the consistent backlash to data gathering and have decided to act with an eye to the future rather than facing enforced changes later.
A major example of this backlash was the recently passed Proposition 24 in California, which is now known as the California Privacy Rights Act of 2020. The abridged version of the new law prevents businesses from sharing consumer information and limits a business’s ability to gather “sensitive personal information”. By taking steps to avoid such situations altogether, some believe that Apple may be giving in too easily. The move could also be understood as a shot at their rivals – Facebook and Google – who are much more reliant on data as a revenue source.
IDFA will experience significant changes when Apple rolls out its iOS 14 updates. While before users universally opted into IDFA, now each app will be required to ask users if they would like to opt-in. However, this prompt will become a one-off proposition to users. The pop-up dialogue will request consent and then not appear again unless a user digs through their device’s privacy settings. This will increase the risk of not getting permission from users who may not initially understand what they are looking for the first time around.
What Happens Next?
The impacts upon ad tech can not be understated. As it stands, in the current environment, 20% of users have enabled “Limited Ad Tracking” (LAT). LAT essentially disables IDFA as it prevents users from receiving targeted ads and blocks their user information from outside use.
While it is difficult to forecast exactly how users will respond to the upcoming changes, it is estimated that the IDFA opt-in rate would be 20% or even potentially lower. This essentially means that flipping the opt-in and opt-out rates will vastly limit the amount of data that ad tech will have to work with. Ad tech, as well as marketers, will be losing at least 80% of their user data.
To many, this may just sound like less data to work with, but IDFA has other capabilities that will further impact those in ad tech. Marketers and ad tech will now no longer have the capacity to do things like retargeting consumers based on their actions or implement frequency capping to ensure their users don’t experience ad fatigue. Publishers and marketers will also no longer be able to attribute app installs to running ad campaigns to measure their success. Apple will now require app developers to update their SDKs to include the SKAdnetwork, which is Apple’s ”privacy safe” advertiser attribution tool. App developers should look to upgrade their SDK’s to include the SKAdNetwork API.
By not being able to see who interacts or views an ad, advertisers will not be able to run performance-based campaigns. Just one year ago, Safari got rid of third-party cookies, and CPMs nearly immediately dropped by 50% because of their new inability to target users. If the IDFA change has a similar effect, then app developers could see as much as 50% of their revenue disappear from 80% of users.
How Can Adtech Thrive Moving Forward?
Despite all of these disruptions to the market, those in ad tech do not necessarily need to think of this as doomsday. For one, ad budgets aren’t going anywhere. These resources can be redistributed to Android ad marketing as this change is only hitting iOS users for the time being.
Meanwhile, other tracking options do also exist, including email tracking in apps. While it does require activating first-party data but it is an opportunity to track users none the less. App developers should also augment their ad strategy with other in-app revenue-generating methods. Developers could consider the use of rewarded and interstitial alongside standard units. Companies can also look to in-app purchases. But they should first consider why users interact with their app and if those interactions would organically lead them to transact with the app and the larger business.
These shifts mean that it’s time to get creative with monetization strategies. In response, the industry could take a step back to adopt contextual targeting – a common approach some five years ago. Yet, it’s more likely that it will look for alternative ways to achieve specific targeting, or that spend will be moved into other mediums.
While it may be too tough of an ask in the short term, having users that are educated and desire a better in-app experience could help significantly. It’s key to leverage creativity to show the true value of an app, rather than just present its features. That way, users can better understand that without revenue, they could lose this service, convenience, or entertainment they have gotten used to enjoying. Without this understanding, it wouldn’t be just strategies changing: The entire business model of app developers would require a substantial revamp.
Legislation may, and likely will, seep into ad tech over the next 5 years, to regulate the industry and reduce anti-competition tactics that the big players can often be accused of implementing. This means what we spend time preparing for now, may help with the continuously evolving landscape over the next few years.