Companies on Apple’s App Tracking Transparency

Apple introduced App Tracking Transparency (ATT) in iOS14.6 several months ago. The idea is that any app that wants to track users even after users stop using the app has to ask for permission. If permission isn’t granted, the app or developers can’t follow users around off premise. Such a lack of signal could result in weakened…tracking, targeting, measure and of course, advertisers’ income. Since the introduction of ATT, some advertisers and developers have voiced fierce criticisms towards Apple for abusing its power. The criticisms grew harsher after Apple debuted its own advertising network. Even though Apple doesn’t rely on 3rd party data for tracking, the move and the awkward timing make it look like Apple doesn’t do it for user privacy, but merely for its own pocket. Privacy proponents, on the other hand, praise this move by Apple as it gives the end users a choice to allow tracking or not. Both sides have strong opinions. But what do the stakeholders have to say? How have companies been affected by the change from Apple?

In this post, I’ll cite as many opinions from relevant parties in this debate as I can, so readers can form their own opinion. I’ll add my own thoughts on this debate in the end

Again, look, I think from our perspective, we haven’t really seen a negative impact of the Apple changes. As we said before, it’s beginning to become a more complex world from a data and privacy perspective.I think that makes the advice to give our clients more important. It will have an impact on individual media owners, depending on their business model. And I think those that have been impacted have been those companies that tend to have sort of a big app download business, which is linked very carefully to the ability to track what’s happening. That’s not part of the business in which we really operate, so I think accounts for the — perhaps the surprises that you saw there.

WPP CEO Mark Read – Q3 Earnings Call

Yes. So for us, it didn’t really have much of an impact. We did — like a lot of people, we’re very aware of it. We have a very big brand business which wasn’t significantly impacted at all. And the fact that we are — have a ton of first-party data with all of our users being logged into the service really helped us grow. So we didn’t really see much of an impact at all. We don’t see much going forward, although we’ll continue to monitor it. And Q4, for us, the biggest impact on Q4 will just be continued growth in podcast and in inventory. We know the demand is there. We know the advertisers are there.So for us, it’s just continuing to expand the inventory available for advertisers.

Spotify CFO Paul Vogel – Q3 2021 Earnings Call

Let me also spend a moment on ATT. We continue to see opportunities around personalization on Twitter as we better leverage our unique signal to improve people’s experience and show their more effective ads across both brand and direct response. The revenue impact we experienced from ATT in Q3 increased on a sequential basis but remains modest. The impact of ATT is likely to vary across ad platforms given the unique mix of ad formats, signal and remediations on each as well as other factors, the mitigations we put in place and the speed with which we’ve adopted new standards like the SKAdNetwork and resulting changes across our technical stack have contributed to minimizing the impact to us.

Since the launch of ATT in April, we’ve invested in supporting SKAdNetwork, opening up 30%-plus more inventory and scale on iOS and launch support for view-through attribution and SK Campaign ID management features in the Twitter ads manager. It’s still too early for Twitter to assess the long-term impact of Apple’s privacy-related IOS changes, but the Q3 revenue impact was lower than expected, and we’ve incorporated an ongoing modest impact into our Q4 guidance. We’ve seen our revenue product development, both related to and distinct from ATT, improved the performance of our products, and we expect that to continue.

Twitter CFO Ned Segal – Q3 2021 Earnings Call

In terms of the iOS 14 changes specifically, they had a modest impact on YouTube revenues. That was primarily in direct response. I think as you all know well, focusing on privacy has been core to what we’ve been doing consistently

Alphabet/Google CEO Ruth Porat – Q3 2021 Earnings Call

Rich, thanks so much for the question and share your disappointment. This has definitely been a frustrating setback for us. But I think over the long term, these privacy changes and protecting privacy for users of iOS and, of course, the Snapchat community is really important to the long-term health of the ecosystem and something that we fully support.

I think when we saw these changes coming, our primary focus was the performance of our advertising platform in the face of this signal loss. So could we still really drive advertising performance, optimize campaigns, make sure our ads were in front of the right people. And we spent the vast majority of our engineering time and effort and energy making sure our ads were still really effective. And we did all sorts of revenue back testing to make sure that we could be revenue neutral. And we were really confident in our ability to drive results with our advertising platform despite the signal loss.

But what I think we really underestimated were the tooling changes. And so what I mean by that specifically is that advertisers have essentially for a long time now, used a set of really sophisticated tools to measure and optimize their campaigns. So that allows them to test out a bunch of different creative and see what’s performing more effectively and so on and so forth. And the big change there was that with these new Apple changes, those tools were essentially rendered blind. And in their place, Apple released a new product called SKAdNetwork that allows advertisers to measure across different advertising platforms but without a lot of the flexibility that they’re used to. So for example, you can only really measure your advertising results using the success parameters that Apple is already defined. The reporting is delayed for a significant period of time and often unavailable, if you don’t hit a certain threshold of conversion. It’s very hard to see performance on a creative level.

Snapchat CEO Evan Spiegel – Q3 2021 Earnings Call

A dozen e-commerce companies interviewed by The Wall Street Journal said they now have to spend a lot more money on these ads to get the same number of sales from them that they could expect before the new feature was rolled out. They also can’t get enough data to know how effective these ads are at driving purchases. Many have reduced their ad spending on targeted-ad platforms. In a July poll of 118 e-commerce store owners by eCommerceFuel, 62% said they had decreased their Facebook ad spending since the iOS upgrade.

Source: WSJ

We’ve been open about the fact that there were headwinds coming, and we’ve experienced that in Q3. The biggest is the impact of Apple iOS 14 changes, which has created headwinds for others in the industry as well, major challenges for small businesses and advantaged Apple’s own advertising business. We started to see that impact in Q2, but adoption on the consumer side ramped up by late June, so it hit critical mass in Q3.

Overall, if it wasn’t for Apple’s iOS 14 changes, we would have seen positive quarter-over-quarter revenue growth. And while we and our advertisers will continue to feel the effect of these changes in future quarters, we will continue working hard to mitigate them.

On targeting, we focused on improving campaign performance even with the increased limitations facing our industry. We’re building commerce tools to help businesses reach more new customers and get more incremental sales. And over the longer term, we’re developing privacy-enhancing technologies in collaboration with others across the industry to help minimize the amount of personal information we process while still allowing us to show relevant ads. Progress in these areas will take time and will be a focus for us throughout 2022 and beyond.On measurement, as we wrote in a recent blog post, we believe we are underreporting iOS web conversions. This means real-world conversions like sales and app installs are higher than what’s being reported from many advertisers, especially small advertisers. We’re making good progress fixing this. We think we’ll be able to address more than half of the underreporting by the end of this year, and we’ll continue to work on this into 2022.

Facebook COO Shreyl Sandberg – Q3 2021 Earnings Call

Kathy Huberty: And Tim, as a follow-up. We recently surveyed 4,000 consumers in the U.S. and China, and the feedback is most of them don’t want to pay for apps or services direct with the developer. They value the security, privacy, ease of transactions with the App Store. So how do you think about balancing the regulators push for more choice with a customer base that’s happy with the existing experience?

Tim Cook: The main thing that we’re focused on, on the App Store is to keep our focus on privacy and security. And so these are the 2 major tenets that have produced over the years a very trusted environment where consumers and developers come together and consumers can trust the developers on the developers and the apps or what they say they are and the developers get a huge audience to sell their software to. And so that’s sort of #1 on our list. Everything else is a distant second.

Apple Q4 2021 Earnings Call

My take

This issue features different stakeholders with varied interests. Even from the advertiser side, companies receive the change from Apple in various ways, depending on whether they are affected by it more or less than their rivals. Hence, when it comes to the question of whether ATT is a net benefit change, then we have to ask: for whom? For consumers, I do think it’s a great development. The surveillance tracking has been the standard practice in digital advertising for years. However, it doesn’t have to continue this way in the future. Consumers used to not have a say in the matter. Now they do. The choice is totally up to them and I think it’s great.

For businesses that rely on digital marketing, it’s undeniable that there is a short-term pain. As you can see above, some have to invest more money in digital ads for the same result. While I feel for them, the fact and the matter is that changes in external environments are part of doing business. Something that business owners have to encounter and overcome.

Regarding advertisers, I’ll say the same thing. The big change has finally arrived. Advertisers can either adapt to a society that is more conscious of privacy or keep complaining. Based on the commentary above, some advertisers have had little adverse impact so far from ATT. They invested in new tools, first-party data, distribution and products to overcome the obstacle. Even Facebook, the biggest whiner, also talked about how they tried to minimize the impact on their business. I don’t blame Facebook or any advertiser for vocal opposition. They do what they have to for their interest. But if millions of dollars is created in spite of violation of consumer privacy, then perhaps it’s time to change.

For Apple, even though apps and developers are important stakeholders in their ecosystems, the number one priority is still consumers. Whether you like Apple or not, the company is trusted by consumers, especially on the privacy front. For years, they have implemented services, software and hardware features that promote privacy. Because of this track record, for the time being, I believe in Apple. Of course, the company also wants to grow their highly profitable advertising network. Where Apple earns credit is that they manage to find a sweet spot that overlaps the two interests. With that being said, the introduction of Apple Search Ads after ATT plants the seed of doubt over their motive. Does it mean that what Apple did is inherently wrong? Not really. Companies exist to make money and look out for their and their shareholders’ interest. Apple is doing what it believes to be the best for their business. Is Apple a bit too much when it speaks from an ivory tower while launching its own ads network? Yeah, but that’s what every corporate Marketing department does.

Based on what I have seen so far, and I will continue to follow this issue, the advent of ATT is a significant change with big consequences in eCommerce, mobile ads and digital ads. I think a year from now, we will not decry ATT as something that wrecks peoples’ livelihood. Instead, it will bring about positive changes and innovation. Perhaps a similar move from Android within the next 2,3 quarters?

Disclaimer: I have a position on Apple, Facebook, Snapchat, Spotify

App Tracking Transparency; Apple’s Advertising Business

In this post, I’ll talk about App Tracking Transparency (ATT), how Apple is different from Facebook and how Apple’s own advertising business is seemingly exempted from it

What is App Tracking Transparency?

Starting iOS14.5, apps have to ask explicit consent from users if they want to track users across different apps and websites. At the heart of the matter is whether advertising platforms such as Facebook should have automatic access to Apple users’ Identifiers for Advertisers (IDFA). IDFA is a unique identifier for your device. It is to your device what Social Security Number is to you personally. Traditionally, the likes of Facebook did have access to IDFA by default. Users had to opt out of cross-app tracking. Facebook used IDFA to deliver personalized ads. For instance, after learning that you just bought some sporting gears from Scheels, they could serve you ads for sporting equipment from other retailers. Also, IDFA helped Facebook measure the effectiveness of their ads. If you get served an ads from a chocolate brand and proceed to actually buy some from it, Facebook can tell the brand that their ads helped convert you into a buyer.

With the introduction of App Tracking Transparency (ATT), access to IDFA by default was severed. Developers now have to seek explicit consent from users whenever they want to regain such access. In a popup, developers can tailor their message to users and make their case as to why allowing tracking is to the users’ benefit.

Source: Apple

How Apple and Facebook differ in their approach to advertising

Before we proceed, let’s take a moment to talk about how Apple defines tracking. Here is Apple:

Tracking refers to the act of linking user or device data collected from your app with user or device data collected from other companies’ apps, websites, or offline properties for targeted advertising or advertising measurement purposes. Tracking also refers to sharing user or device data with data brokers.

Examples of tracking include, but are not limited to:

– Displaying targeted advertisements in your app based on user data collected from apps and websites owned by other companies.

– Sharing device location data or email lists with a data broker.

– Sharing a list of emails, advertising IDs, or other IDs with a third-party advertising network that uses that information to retarget those users in other developers’ apps or to find similar users.

– Placing a third-party SDK in your app that combines user data from your app with user data from other developers’ apps to target advertising or measure advertising efficiency, even if you don’t use the SDK for these purposes. For example, using an analytics SDK that repurposes the data it collects from your app to enable targeted advertising in other developers’ apps.

The following use cases are not considered tracking, and do not require user permission through the AppTrackingTransparency framework:

– When user or device data from your app is linked to third-party data solely on the user’s device and is not sent off the device in a way that can identify the user or device.

– When the data broker with whom you share data uses the data solely for fraud detection, fraud prevention, or security purposes. For example, using a data broker solely to prevent credit card fraud.

– When the data broker is a consumer reporting agency and the data is shared with them for purposes of (1) reporting on a consumer’s creditworthiness, or (2) obtaining information on a consumer’s creditworthiness for the specific purpose of making a credit determination.

Source: Apple

Long story short, Apple allows that an app can track you within its property and your data doesn’t leave your phone. It’s also not tracking if the data sharing is for an official purpose that is not ads-serving. Think about it this way. When you walk into a Walmart and walk around the aisles, the cameras inside the store can tell Walmart what you like and what you don’t. I rarely venture into a Walmart’s candy or cheese aisle. I am fine with Walmart knowing it because the store is their property and I have a direct relationship with them whenever I shop there. However, it would be not OK if Walmart struck a deal with Starbucks that allows the two companies to share my shopping behavior in their stores with each other without my consent. It would be really creepy.

The same goes for our data on mobile device. Facebook can serve us ads based on our behavior on their properties, including the big blue app, Messenger, Instagram or Whatsapp. To Apple, that’s possible and allowed. However, it is no longer allowed that Facebook follows users across websites & apps, and uses such knowledge to serve ads without our consent. A permission has to be granted first.

Shortly after the introduction of ATT, Apple debuted their Apple Search Ads. Apple Search Ads enables developers to serve users ads on the Search Tab of the App Store. According to the company, 70% of App Store users used the Search tab to find apps and 65% of searches result in downloads. Hence, it’s a valuable real estate to both Apple and developers. To enable targeted ads, Apple groups customers into segments based on data that they retrieve from:

  • Apple ID: name, age, location, gender, or anything that you list on your Apple ID
  • Device information: language setting, device type, OS version, mobile carrier
  • Apple News & Stocks: topics and categories that you interact with
  • App Store: searches on the App Store. Downloads from the App Store and in-app purchases are only allowed when the targeting is done by the app’s developer. Said another way, the fact that you downloaded Call of Duty and the stuff you bought inside the app can only be used for targeting by Call of Duty itself, not somebody else

Apple has received a lot of criticisms since the introduction of Apple Search Ads. Some critics say that Apple has a double standard for its own advertising business because there is no popup to ask for users’ permission with Apple Search Ads. The criticism is misguided in my opinion. The reason why there is no permission seeking from Apple is that the company uses only first-party data (data that users already give Apple and data that is created & gathered on Apple’s apps) for targeting. It doesn’t use data gathered on other apps to serve you ads on the App Store. Based on how Apple defines tracking as I laid out above, it is not tracking. In fact, Apple’s definition of tracking is similar to that of World Wide Web:

Tracking is the collection of data regarding a particular user’s activity across multiple distinct contexts and the retention, use, or sharing of data derived from that activity outside the context in which it occurred. A context is a set of resources that are controlled by the same party or jointly controlled by a set of parties.

Source: World Wide Web

In the case of Facebook, it wants to get users’ data OUTSIDE its property apps for targeting. With ATT, Apple wants their rival to at least ask us, the users, for permission to use our own data. To Facebook, it’s unfortunately a bridge too far. I mean, I am not naive enough to think that financial benefits aren’t in Apple’s calculations when they plan out ATT and Search Ads. The difference here is that while Facebook makes money at the expense of user privacy, Apple found a way to generate more revenue and still honor our privacy. Other critics say that Apple creates its own advantage because, with ATT and the new Search Ads, Apple is likely the only party that can track app download conversion. It is true that Apple will likely be the only advertiser that can tell developers whether their ads are effective. But does Apple have a duty to allow Facebook to track users and know the conversion from the App Store in the first place? If a native Facebook shop that lives entirely on Facebook runs a Google ads to get people to come to the store and make purchases, will Facebook let Google know whether and when a purchase is made? I don’t think so. Hence, why does Facebook want something from others that it doesn’t want to do in the first place? Plus, whether we download an app is our data. Why should Facebook’s desire to know that be put above our privacy? It’s a weird criticism, if you ask me.

In short, Apple has been a company with a perspective and excellent, like wealthiest-in-the world excellent, at making money with their products and services true to that perspective. In this case, Apple thinks it can deliver targeted ads while respecting users’ privacy and making, I assume, a great deal of money in the process. If there is anything I think Apple could have done better, it’s the communication and the timing of ATT and Apple Search Ads. But overall, I think I agree with this Twitter user

Disclosure: I have a position on both Facebook and Apple (I know, I know)