The industry is waiting with bated breath ahead of Apple’s imminent iOS update, which will severely limit tracking and ad targeting across Apple’s mobile devices—and impact the $105 billion U.S. mobile-ad industry.
Apple’s update will introduce App Tracking Transparency (ATT), a framework that requires publishers to ask users whether they want to be tracked across other apps and websites they visit.
The consensus among the ad industry is that opt-in rates will be low. But what happens next is anyone’s guess, with almost half of all marketers now scurrying for a fresh means of ad targeting and measurement.
Loch Rose, chief analytics officer at Publicis-owned Epsilon, said “nobody really knows for sure” what will happen once the tracking prompts become widespread, but CPMs of in-app ads are expected to go down if opt-out rates are high.
Widespread opt-outs would lead to the deprecation of IDFAs (Apple’s mobile identifier), making ad targeting and attribution much harder, since a foundational piece of data would essentially be absent in the programmatic bidstream.
“We do have a substantial business in bidding on in-app inventory, and that will drop” since certain percentage of users will no longer be targetable, Rose said.
Apple is facing down workarounds
Apple has already clamped down on any workarounds to its IDFA changes, blocking efforts from tech companies practicing fingerprinting, or collecting different data sets on an individual that add up to be a unique identifier. The Silicon Valley giant has rejected apps that integrated with measurement company Adjust, which was found to be violating Apple’s policy.
The iPhone maker is also stopping a group of Chinese tech companies, including Tencent and ByteDance, from implementing a workaround called CAID that would still allow Chinese app developers to serve individually targeted ads.
“The App Store terms and guidelines apply equally to all developers around the world, including Apple,” Apple said in a statement to the Financial Times in March. “Apps that are found to disregard the user’s choice will be rejected.”
Apple introduced intelligent tracking prevention (ITP) to desktop Safari and mobile web browsers, effectively turning off individual tracking in those areas. Although ATT still leaves some wiggle room, as some users may not opt-out of tracking. Theoretically, if enough users opt-in and IDFAs remain relatively persistent, then Apple’s changes are moot.
ATT By The Numbers:
- Median opt-in rate of 32%, according to AppsFlyer
- Expected initial CPM hit of 50%, according to Permutive CEO Joe Root
- 10% of spend on The Trade Desk, the largest independent DSP, is tied to an IDFA
But that likely won’t be the case, as opt-out rates among users seeing test prompts aren’t encouraging. The median opt-in rate so far is 32%, according to an analysis of 300 apps across 2,000 devices from AppsFlyer, a mobile marketing and attribution company. The analysis found that apps with higher consumer affinity saw higher opt-in rates, hovering around 40%.
It remains to be seen whether those opt-in rates will stay consistent when ATT roles out widely. Dating app Bumble said in its S-1 filing that it expects opt-in rates to be between 0-20%. Demonstrating the breadth of the identifier, Trade Desk said that 10% of the 12 million ad opportunities per second on its platform are tied to an IDFA.
If opt-out rates are high and IDFAs do become scarce, app developers and publishers should expect to see a 50% decline of in-app CPMs, said Joe Root, co-founder of Permutive, a publisher-focused data management platform. This mirrors the impact media owners saw when Apple introduced ITP, he said.
One developer source told Adweek that their company is bracing for a 9% revenue hit in the short term. Facebook, which has loudly criticized Apple’s privacy update, saying it would hurt small businesses and could see a revenue hit of 7%, according to projections from Eric Seufert, analyst, and author of Mobile Dev Memo.
For marketers, the big question is what the loss of IDFAs means for performance, since the identifier is an essential signal used for measurement. Generally, when CPMs drop, performance metrics like cost-per-acquisition tend to drop with it, which would make IDFA deprecation less concerning. But even if that were to happen post-ATT, Epsilon’s Rose said not knowing who saw what ad makes measuring performance nearly impossible.
“If we don’t know who we’re talking to at the time when we actually deliver the message, we don’t have a way of measuring performance. That’s how we tie together the media to the ultimate conversion,” said Rose.
About 58% of advertisers expect to move some or most of their budgets out of Apple’s ecosystem and into other areas like Android devices or connected TV, according to a report from Advertiser Perceptions.
Facing ATT, along with Google’s plans to rid third-party cookies from Chrome in early 2022, 47% of advertisers are investing more in alternative identity solutions, according to Advertiser Perceptions.
Permutive’s Root said a year ago publishers were more willing to test identity alternatives that are essentially fingerprinting, but now they’ve largely backed away in light of Apple’s enforcement approach, which essentially punishes the media owner for the faults of their partners deploying illicit tech.
The only clear takeaway from Apple and Google’s changes undermining cross-site tracking is that targeting individuals across the open web is the way of the past.
“On the web, it’s your domain which gets classified as a tracking script, and in the app ecosystem, it’s your app which gets rejected from the App Store,” said Root. “This is the most explicit push from Apple that advertising is cohort-based, not identifier based.”