By Patience Haggin and Tim Higgins
As Apple Inc. moves ahead with long-promised plans to make it
harder to target certain iPhone users with ads, advertising
companies and software developers are preparing for major
disruptions to the $400 billion digital advertising industry.
Facebook Inc., gaming companies and ad-tech providers are
weighing a variety of responses, including updated payment models,
new advertising techniques and notifications for users. In China,
social-media apps have tested a potential workaround that would
continue tracking users' digital footprints.
The changes to Apple's iPhone software -- part of what the
company describes as an app-tracking transparency initiative meant
to protect user privacy -- will let users decide whether to allow
apps to track them for targeted ads. The iPhone maker first
announced the plan in June and intended to roll it out in
September, before delaying that timeline until 2021 to give
partners more time to prepare.
Many of those affected have voiced opposition to the plan for
months. But with the change expected in the coming weeks, they are
now preparing for it and weighing the potential impacts.
"Most people are resigned to the reality of this," said Eric
Seufert, a strategist and consultant who has held several workshops
on the matter for developers and ad tech firms. "I don't think
anyone thinks that they have any sort of agency here to change
things or to institute a workaround."
Once the software is installed, Apple will ask users in a pop-up
if they want to allow a given app to track their activity across
apps and websites from other companies. If users choose to "ask app
not to track, " the apps will no longer be able to collect a user's
advertising identifier without permission. That ad ID is widely
used by digital-ad and data brokers, but many expect users to
reject tracking amid concerns about privacy.
Facebook cautioned investors in January that the coming changes
to Apple's operating system posed a risk to its business. The
social-media giant has said it would launch its own in-app, pop-up
message to tell users that tracking helps personalize ads and
supports businesses that rely on ads to reach consumers. The
approach of dueling pop-ups might befuddle or annoy users as the
changes are rolled out and implemented.
Facebook Chief Executive Mark Zuckerberg, during an appearance
on the Clubhouse app last week, struck a slightly more positive
tone while remaining critical of Apple's change. He said the move
could strengthen his company's own in-app retail channel "by making
it harder for [advertisers] to basically use their data in order to
find the customer that would want to use their products outside of
our platforms."
Alphabet Inc.'s Google has said it plans to comply with Apple's
new rules. Christophe Combette, group product manager for Google
Ads, cautioned in a blog post that the changes would reduce
visibility into metrics showing how ads drive app installations and
sales, and how advertisers value and bid on ad impressions. Google
plans to expand use of a tool that infers whether an ad interaction
led to online spending or subscription without identifying
individual users.
Companies in China tested a possible workaround that would
involve creating an alternate advertising identifier to track users
without letting them opt out of the data collection, according to
people familiar with the matter. The testing was part of an
initiative developed by the state-backed China Advertising
Association to create a national standard for Chinese technology
companies, the people said.
The identifier, called CAID, uses a technique known as "device
fingerprinting" that Apple has banned. This method logs data passed
between phones and apps, such as their internet protocol addresses,
and uses them as clues to keep track of that user. The Financial
Times earlier reported the effort.
Tencent Holdings Ltd. and ByteDance Ltd. were among the
companies that participated in the testing, the people said.
Tencent hasn't implemented the technology, a person familiar with
the initiative said. A Tencent executive told investors Wednesday
that Apple's ad-tracking changes were causing uncertainty
globally.
Video-sharing platform TikTok, which is owned by ByteDance,
doesn't intend to use CAID, said a person familiar with the
matter.
Apple would reject such apps that violated its rules, which have
banned device fingerprinting for over a decade, a spokesman said.
"We believe strongly that users should be asked for their
permission before being tracked," he said.
Apple's plans to enforce its new policy are likely to lead some
apps to change their business models. "Some smaller apps, which
used to be free until now, might switch to being paid," said Barak
Witkowski, vice president of product at mobile-ad measurement
company AppsFlyer.
Nii Ahene, chief strategy officer at digital-ad consulting firm
Tinuiti, predicted an initial pullback in advertising, especially
if bought through Facebook, while advertisers gauge its
effectiveness under the new rules. In time, advertisers might shift
from finding new customers toward communicating with existing ones
to boost loyalty, he predicted.
This could be especially painful for the videogame industry,
which has long used targeted ads to find the rare customer willing
to spend big on in-app purchases.
"They spend most of their dollars trying to find the 1% or 2% of
their audience that spends $100, $200 a month," Mr. Ahene said.
"It's going to be significantly diminished by the fact that you
don't have a unique identifier to attract those individuals."
Videogame maker Unity Software Inc., which makes money selling
software to other gaming apps, said last month that it expected a
$30 million hit to revenue this year, or about 3% of the year's
expected sales, as advertisers adjust to Apple's changes.
Julie Shumaker, Unity's senior vice president of revenue, said
she believes it likely that spending would eventually rebound as
advertisers target their ads based on the apps or webpages where
they appear, rather than on individual consumers' behavior.
Some game makers will likely be motivated to change their games
in ways that better identify users who spend more money. Under the
new rules, if a user downloads an app from an ad and spends money
in the new game, the advertiser would be able to find out whether
they make a purchase within the first day.
"They will optimize their game to encourage the user to purchase
in the first 24 hours, or create some other signal that gives you
an idea of whether they'll be a valuable player," Ionut Ciobotaru,
chief product officer at Verve Group, said. "This is important so
that they'll know if they acquired real customers or not from a
given ad campaign."
(Dow Jones & Co., publisher of The Wall Street Journal, has
a commercial agreement to supply news through Apple News.)
--Yang Jie contributed to this article.
Write to Patience Haggin at patience.haggin@wsj.com and Tim
Higgins at Tim.Higgins@WSJ.com
(END) Dow Jones Newswires
March 26, 2021 05:44 ET (09:44 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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