iOS 14 privacy feature delay will help advertisers cope with revenue hit
Investment bank Cowen sees Apple's decision to delay new iOS 14 privacy features as a net positive both for consumers and the relationship between Apple and developers.
Credit: Apple
One specific privacy feature coming in Apple's next update requires apps to obtain permission from users to track them across other apps and websites. Apple has since said the feature will go live in early 2021.
In a note to investors seen by AppleInsider, Cowen analyst Krish Sankar said that the move is a "slight positive from a developer relationship standpoint." That's because, although a boon to privacy and consumers, the change is likely to have an effect on developer revenue and possibly overall App Store earnings.
The feature concerns the Identifier for Advertisers (IDFA) tracking tag, which allows apps to collect aggregate data without personally identifiable user information. Allowing users the ability to opt-in to IDFA tracking gives them much more control over their data on iOS.
Apple's decision to require permission to use IDFA has been controversial among advertisers. Facebook, for example, has warned businesses that they could see up to a 50% drop in Audience Network revenue on iOS devices.
"We believe Apple's decision to delay the new IDFA-related feature at the very least helps to maintain the status quo in developer relations but it could also have an unclear impact toApp Store revenues near term," Sankar wrote.
The analyst notes that, without IDFA, advertisers could find it much more difficult to market or sell products to end users. Additionally, it will become harder to serve targeted ads -- which typically garner higher prices.
Although the change is coming despite advertiser protestations, Cowen notes that the three month period between WWDC 2020 and the release of iOS 14 could have been too short a period for developers to update, test, and formulate new advertising technology algorithms.
For example, without IDFA tracking, businesses dependent on targeted advertising will likely need alternative statistical methods or models to match user profiles with products, services, and ads.
"Apple continues to advocate and implement user Privacy policies that we believe aim to enhance the user experience of the iOS platform longer term. While it is unclear if there is any near-term impact to App Store revenues, the decision to balance developer concerns and feedback is also a welcome move to ensure the iOS platform remains attractive for developers over the medium/longer term," Sankar wrote.
Cowen is maintaining its $133 AAPL price target, which is based on a 25x multiple to Apple's core businesses and a 41x multiple on Services.
Credit: Apple
One specific privacy feature coming in Apple's next update requires apps to obtain permission from users to track them across other apps and websites. Apple has since said the feature will go live in early 2021.
In a note to investors seen by AppleInsider, Cowen analyst Krish Sankar said that the move is a "slight positive from a developer relationship standpoint." That's because, although a boon to privacy and consumers, the change is likely to have an effect on developer revenue and possibly overall App Store earnings.
The feature concerns the Identifier for Advertisers (IDFA) tracking tag, which allows apps to collect aggregate data without personally identifiable user information. Allowing users the ability to opt-in to IDFA tracking gives them much more control over their data on iOS.
Apple's decision to require permission to use IDFA has been controversial among advertisers. Facebook, for example, has warned businesses that they could see up to a 50% drop in Audience Network revenue on iOS devices.
"We believe Apple's decision to delay the new IDFA-related feature at the very least helps to maintain the status quo in developer relations but it could also have an unclear impact toApp Store revenues near term," Sankar wrote.
The analyst notes that, without IDFA, advertisers could find it much more difficult to market or sell products to end users. Additionally, it will become harder to serve targeted ads -- which typically garner higher prices.
Although the change is coming despite advertiser protestations, Cowen notes that the three month period between WWDC 2020 and the release of iOS 14 could have been too short a period for developers to update, test, and formulate new advertising technology algorithms.
For example, without IDFA tracking, businesses dependent on targeted advertising will likely need alternative statistical methods or models to match user profiles with products, services, and ads.
"Apple continues to advocate and implement user Privacy policies that we believe aim to enhance the user experience of the iOS platform longer term. While it is unclear if there is any near-term impact to App Store revenues, the decision to balance developer concerns and feedback is also a welcome move to ensure the iOS platform remains attractive for developers over the medium/longer term," Sankar wrote.
Cowen is maintaining its $133 AAPL price target, which is based on a 25x multiple to Apple's core businesses and a 41x multiple on Services.
Comments
The only thing delayed implementation does is give advertisers more time to perfect their device fingerprinting algorithms. Lovejoy wrote a depressing opinion piece over at 9to5. https://9to5mac.com/2020/09/04/ad-industry-tracking/#disqus_thread
The TLDR version is Facebook's caterwauling might just be theatrics designed to lull the concerned into a false sense of security about iOS 14's app permissions. Reminds me of the government's "woe is me" tiny violin playing regarding device unlocking. Me thinks they doth protest too f'n much.
That's interesting. A couple of people followed up by saying when they tried the same tests as Lovejoy, the test site couldn't uniquely identify them. According to this white paper, Apple is already working on defeating device fingerprinting.
https://www.apple.com/safari/docs/Safari_White_Paper_Nov_2019.pdf
But of course, this will only work if you're using Safari.
I wonder if AI is going to avail itself of the fingerprinting tech? This is an ad supported site (like most of the internet sites) that probably won't fare too well if the privacy feature goes live and they have no way around it.
https://blog.chromium.org/2020/01/building-more-private-web-path-towards.html
The other parties in this mess are the publishers and the advertising infrastructure companies. I can see advertising becoming less viable as a revenue stream for publishers - if we assume that payment to publishers increased for ads that provided more information about users, then if tracking goes away the price will go down too. Publishers will, I think, need to turn to subscription models to ensure sustainable revenue.
The advertising infrastructure companies will, I think, make the most noise but suffer the fewest consequences. Some (most?) may have invested heavily in tracking technology based on an estimate of future revenue that will now have to be revised. But the two biggest (Facebook and Google) operate at a scale that enables them to display ads pretty much anywhere they want - and their delivery technology can be streamlined if it doesn't need to perform as many checks before pushing the ad to the requestor, resulting in lower processing costs, fewer bits sent over the wire and presumably higher throughput. So they're going to be just fine.
For the end users, I think it will be an improvement: pages won't be stuffed quite so full of code (we can only hope) so the speed should improve and the data usage should drop, since the ads are less likely to be relevant to us we will actually pay more attention to them in case we miss something that might be useful, and we can hopefully stop worrying that a search for a medical illness might affect our ability to get insurance twenty years down the track.
But only time will tell.
The problem is that tracked ads pay more apparently. The thinking is that if an ad is targeted then the victim is more likely to click on it. I can’t say whether this is true or not because I’ve never met anyone who will admit to clicking on an ad.