The Impact of iOS 14 on the Digital Advertising Industry

As part of the Apple’s iOS 14 update, users are now given a choice to block the IDFA identifier at the application level. This implies that with the iOS 14 update, applications are now required to ask users for permissions to collect and share their data.

“The Identifier for Advertisers (IDFA) is a random device identifier assigned by Apple to a user's device. Advertisers use this to track data so they can deliver customized advertising. The IDFA is used for tracking and identifying a user (without revealing personal information).” Source: Adjust.

Although this new rule respects users’ data by presenting them a choice to opt-out of ad tracking, it has serious repercussions on both the advertisers and publishers in the advertising industry.


New iOS 14 Privacy Policy Prompt


What are some of these implications?


1) Advertisers:

Loss of Personalisation in Ads


According to a survey conducted by Singular, 61.5% of user would not allow app tracking in their iPhone. As more users opt-out of app tracking by Facebook, advertisements will be less effective.


Advertisers will have limited ability to effectively target consumers in any segment of their purchase journey as they lack the transparency and full control of their ad delivery and performance. Besides that, advertisers will not be able to advertise to consumers via remarketing campaigns since the Facebook tracking pixel is now rendered useless for these users.

For brands or organisations that rely heavily on Facebook ads for sales, de-personalized ads will have an adverse impact on their ad conversions and sales.


Small Business Take the Biggest Hit


With limited advertising budget, small businesses require more options to refine their targeting to reach their ideal audience. However, the new iOS 14 policy impedes small businesses’ ability to do so, making it even harder for them to compete.


While bigger companies have the resources to build their own trackers, smaller companies do not have such luxury and have always relied on Apple, Facebook, and other platforms' for such data.

Small businesses saw a 60% dip in sales when they are unable to remarket to the small pool of users who have visited their site or to leverage on their Facebook pixel data to market to lookalike audiences.


2) Publishers/Developers


The global in-app advertising market size is expected to grow at CAGR of 19.4% from 2019 to 2025, reaching USD226.4 billion. As consumers spending more time on their mobile devices, in-app advertisements have become an important marketing channel for advertisers as it offers data tracking and user targeting features.


Significant Dent in Publisher Revenue (Audience Network)


For those that are not familiar with Facebook’s Audience Network, it is an extension of Facebook advertising beyond the Facebook platform. Developers and publishers can monetise by showing ads from Facebook advertisers in their apps.


Facebook's Audience Network Ads display

As advertisers have limited control over their targeting and campaign performance breakdown, they would not want to pay as much for ads. This implies that publishers and developers should expect a lower cost per thousand impressions (CPM) as ad spend will be drastically reduced in these placements.

Consequently, the Audience Network has become less relevant, in some cases, even useless. (In testing, Facebook have seen more than 50% decrease in Audience Network publisher revenue when personalisation was removed from mobile app ad install campaigns.)


Businesses will Resort to In-app Purchases or Subscriptions


Due to the limit in monetisation, applications and platforms that used to be free may now require subscriptions or in-app purchases as publishers look for alternative monetisation methods.


How can we work around this?


Focus on Campaigns aside from ‘Conversion’


Instead of running conversion campaigns, advertisers can look to run traffic or lead generation campaigns and use their websites’ internal tracking to determine the conversions and ad performance. This helps to decrease the reliance on Facebook tracking pixel.


Build Your Own First-party Database


Brands and advertisers should also adopt a long-term approach by creating their own customer database with email address and/or phone numbers as the primary information. Rather than relying on third-party data and be susceptible to dynamic changes, brands can continue to market to their consumers across ad products. For instance, Netflix's landing page where there is a compelling offer that draws consumers to leave their details. (More examples here)


Netflix's landing page

By focusing on lead generation and CRM systems, brands can gradually build their own audience which can be retroactively uploaded into Facebook to generate custom and lookalike audiences for remarketing campaigns. With that, there will be no limitations from the new iOS 14 policy.


Conclusion

“If you can’t fly, then run. If you can’t run, then walk. If you can’t walk, then crawl. But whatever you do, you have to keep moving forward” -Martin Luther King Jr.

Although these updates are intimidating and will disrupt the advertising industry, I believe that new initiatives or innovations may emerge in the process. As these changes prompt the different stakeholders to re-evaluate their short- and long-term advertising strategy, this helps to build resilience and adaptability.


Rather than relying on third-party data, brands and advertisers will look to build deeper connections with their customers which can create more sustainable brand loyalty. Instead of monetizing through in-app advertisements, developers and publishers will create more value for users and improve user experience with the reduction of advertisements, which can justify subscriptions and in-app purchases fees.


The future of the digital advertising industry is exciting. If you are ready for change.


Written by Shuang Yu Yap, marketing associate and consultant of KeyHole Insights. A marketing enthusiast who explores the combination of insights, content, design and analytics to create value for businesses and consumers. To receive insights on the latest topics, subscribe to our monthly newsletter or follow us here.


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