Winners and losers after Apple tweaked iOS 14 privacy settings

According to reports, Apple is expected to adjust the privacy settings software in iOS 14 this spring to allow users to better control their privacy. However, this move will also have a great impact on the mobile Internet digital advertising ecosystem. This adjustment will affect the unique device identifier in all iPhones and iPads, namely the "Advertiser Identifier" (IDFA).

Companies that provide mobile advertising services rely on this identifier to identify users, deliver ads accurately, and evaluate advertising effectiveness.

With the upcoming update to iOS 14, apps that want to track users will have to ask for their permission first. This change is expected to greatly affect the digital advertising industry, and here are the winners and losers from this adjustment as counted by the US media.

Big Winner: Apple

[[392880]]

Apple is the clear winner in the coming changes, giving users more control over whether their activities on iPhones and iPads are tracked.

For many users, it’s a helpful adjustment. From the documentary “The Social Dilemma” to Facebook’s Cambridge Analytica scandal in 2018 and controversies over misinformation and U.S. election ads, consumers are becoming more aware of how their personal data is being used.

“If you’re in the Apple ecosystem, you play by Apple’s rules,” said Daniel Newman, chief analyst at Futurum Research. “What they’re doing will largely be viewed by the world as a good thing.”

The change will also benefit Apple's business. Many companies rely on this tracking ability to accurately place app installation ads. These ads are common on Facebook and Snapchat. However, as third-party tracking data becomes less and less, analysts expect advertisers' budgets to shift more to Apple's App Store ads.

Nicole Perrin, principal analyst for digital advertising at Insider Intelligence, said advertisers “are already investing money there and having success there, so if they don’t have the ability to target the users they want in other apps, they’re likely to invest more resources in targeting users searching in the App Store.”

Neutral: Google and Amazon

Apple's changes to privacy software may have little impact on Google because Google currently reaches users through a variety of services, including search, email, YouTube and Google Shopping. As a result, Google has a large amount of independent data that can be used for targeted advertising.

“I wouldn’t be surprised if Google continues to prove to advertisers that they can still do just as well in this new environment,” Perrin said.

Amazon is similarly in the spotlight, with its wealth of third-party data. It’s often the first stop for shoppers online, and it also delivers targeted ads to users based on the keywords they search for within its apps.

“Amazon knows what you actually purchased because Amazon sold it,” Newman said.

Losers: Facebook and Snap

[[392881]]

Facebook relies on the "view-to-conversion rate" metric to measure how often users buy a brand's products after seeing a brand's ad. The device unique identifier is very important for measuring this metric. If the device unique identifier is lost, social media companies such as Facebook will have to find other ways to measure advertising effectiveness.

In August, Facebook admitted that Apple's upcoming release of iOS 14 could cause its Audience Network advertising business to decline by more than 50%. Facebook generates almost all of its revenue from advertising. But people familiar with the matter said Audience Network only contributed a small portion of that, less than 10% of the company's net revenue.

“Their networks outside of Facebook will also be impacted, but they have a lot of their own data to work with,” said Ron Josey, an analyst at JMP Securities.

This means that Facebook is ready for business transformation. For example, Facebook is launching new features to support Facebook and Instagram users to shop in the app. This makes it easier for Facebook to measure the effectiveness of advertising for marketers.

In March, Facebook CEO Mark Zuckerberg said Apple's changes to its privacy software could be good for business in the long run if more retailers sold products directly through Facebook's two apps.

Snap is another company expected to be affected. Snap Chief Financial Officer Derek Andersen warned in its fourth-quarter earnings report that Apple's iOS changes could cause an immediate disruption to Snap's advertising demand once implemented.

Although the long-term impact of this move on Snap's business is unclear, analysts believe that it will not affect Snap for too long. This is because Snapchat interacts with users frequently enough to generate independent data for advertising targeting. In addition, Snap also stated that it will launch a long-term project to add more e-commerce and in-app purchase services to Snapchat.

Losers: Ad tech companies

Many ad tech companies track users to deliver ads as accurately as possible, and losing unique device identifiers will make this tracking more difficult.

Advertising platform Criteo warned in its fourth-quarter earnings call that many upcoming privacy changes, including Apple's iOS privacy settings upgrade, could have an impact of about $60 million on its 2021 business.

Another related company, PubMatic, said in February that there is uncertainty about the timing and extent of the impact of Apple's move to cancel IDFA. Meanwhile, Unity Software told analysts on its fourth-quarter earnings call that it expects its revenue to fall 3%, or $30 million, in 2021 due to Apple's adjustments.

However, these companies are also adapting accordingly. For example, Criteo said it is preparing to use more of its own data to target users.

The move to cancel IDFA may not lead to the demise of these companies, but they will have to face this challenge.

Likely winners: Connected TV companies

As Apple disrupts the mobile advertising ecosystem, some analysts believe that connected TV companies that place ads through streaming video services may benefit from it. This is because these companies do not rely on Apple's iOS tracking capabilities to deliver targeted ads to viewers. And as more and more users' video viewing habits shift from TV to video platforms, their advertising revenue will also grow.

According to eMarketer, connected TV ad spending in the United States exceeded $9 billion in 2020 and is expected to grow further to nearly $25 billion by 2024.

Companies that could benefit include Roku, Viant Technology and Magnite. Another company, Trade Desk, has said that while 10% of its advertiser spending relies on IDFA, it is also expanding its connected TV business and could benefit from the shift in advertiser budgets.

Looking ahead, companies will have to rely more on their own data to deliver the most accurate advertising possible if they hope to continue operating in the digital advertising ecosystem.

“The way different companies adapt, innovate and invest will determine how well they can navigate these changes,” said Daniel Flax, an analyst at Neuberger Berman.