The move, called App Tracking Transparency (ATT), will force app makers to ask permission before they can collect a unique identifier on every iOS device known as the IDFA. A significant proportion of users are expected to say no. Today, developers and advertisers use the IDFA to target mobile ads and measure how effective they are.
Apple has consistently said that the change to its platform, announced last June, is about privacy.
However, digital advertising professionals say there could be a side benefit for Apple: Increased power over its App Store, giving Apple more control over the kinds of apps that get popular and gross millions through the store.
In particular, it could make it harder for app makers to draw consumers to download their apps through in-app advertisements. That could help Apple instead guide consumers to the apps that it chooses to highlight in the App Store for its own business purposes. For instance, Apple could highlight more games that charge through subscriptions (where Apple gets an ongoing cut), and fewer casual social games that monetize heavily through in-app purchases (which could detract from the overall iOS gaming experience and harm Apple’s brand).
The move could also boost Apple’s own Search Ads, which are ads for app downloads that appear directly inside the App Store.
Apple’s App Store and advertising business are both reported as part of its services business, which the company has highlighted to investors as a growth engine. It generated revenue of $53.8 billion in fiscal 2020, up 16% from the previous year.
“Apple has been able to stake out the moral high ground, I think, claiming that they’re focused on user privacy. But in reality, they really surrendered app discovery to and merchandising to Facebook and Google. What I see them doing is trying to get that control back,” said Brian Bowman, CEO of Consumer Acquisition, a digital advertising firm focusing on user acquisition.
When contacted for comment, Apple reiterated its commitment to privacy.
“We believe privacy is a basic human right and that users should have transparency and choice about how their data is collected and used. We’ve invested in privacy-preserving technologies for decades, with Intelligent Tracking Prevention in Safari, Privacy Labels on the App Store, Sign in with Apple, and App Tracking Transparency. Our privacy features apply to all developers — including Apple. But users won’t see App Tracking Transparency prompts from Apple because we don’t track users.”
How app install ads work
For years, many of the apps that have topped Apple’s App Store charts have been supercharged by a marketing strategy designed to target users who are most likely to spend.
Companies like Facebook, Google, and TikTok sell app install ads. They usually show up within other apps as a pop-up or an item inside a feed. When users click on the ad, they’re brought to a page in the App Store to download the advertised app.
App install ads are core part of the user acquisition strategy for many companies, especially e-commerce companies and casual games that rely on getting a small fraction of users to buy lots of add-ons within the game (these users are sometimes known as “whales”). App makers will spend $96.5 billion on app install ads in 2021, or about a third of total mobile spending on ads, according to an estimate from AppsFlyer, which makes advertising software for app makers.
That’s because they’re effective. Sensor Tower, an analytics firm monitoring app stores, published a study on Thursday finding that referrals from other apps drove 20% of new app installs on the App Store in 2020. The only larger source was direct searches on the App Store, which accounted for 59% of installs.
App install ads are often sold by price-per-install, ranging from pennies to tens of dollars. Typically, the ad buyers will estimate how much a customer in a given demographic might spend throughout their time using the app, and make a simple mathematical judgment. If the price-per-install is less than the estimated lifetime value of the people those ads are targeting, then the app maker buys as many of those ads as it can afford.
The ATT change, and other Apple privacy tweaks, threaten this model by drastically reducing the amount of information that marketers have about how effective their ads are. Without that information, app marketers can’t tell if they are getting the right people to install their apps.
“When you look at the companies who are investing $6 [million] to $20 million a month, every month for 18 months to get a payback, all that stuff becomes opaque very, very quickly, when Apple flips that switch,” Bowman said.
Casual gaming apps, which often appear on Apple’s Top Grossing charts, are most likely to be hurt. Games are a huge part of Apple’s App Store business, representing 65.8% of spending on the platform, according to a Sensor Tower estimate.
For games, referrals are the top source for downloads, driving 38% of first time installs in 2020 — more than people directly searching through the App Store, according to Sensor Tower.
“The primary growth strategy for most, if not all, mobile gaming companies is paid ads. There aren’t really any gaming companies that don’t utilize them,” said Eric Seufert, the author of Mobile Dev Memo, who has a background in user acquisition for gaming companies.
Unity, a company that makes gaming and advertising software for small developers to build on top of, warned in February that the IDFA change could change the “way mobile game developers acquire customers and how they optimize lifetime customer value.”
Andre Kempe of Admiral Media, a marketing firm focused on mobile app publishers, believes that Apple’s change could force game-makers to change the way their games work. Instead of relying on a few huge spenders, they might have to target larger numbers of people to spend smaller amounts.
“Once they realize, okay, I need to make money with this, then some product manager would say, okay, we need to put a payment screen somewhere in the first level, which you haven’t seen before, so the user experience will change a little bit,” said Kempe.
Yes, Apple sells ads
There are more than 1.8 million apps on the App Store, and app marketers say that apps can’t rely on hoping people discover them on the App Store, or waiting around for Apple to feature them.
“It’s the tyranny of over-choice, because you go in there, and you can access and download anything for the most part on the free-to-play side, from a game perspective,” TS Kelly, head of analytics at Carat, a media agency, said.
Apple prefers to promote elegant, beautiful apps inside the App Store that fit with its brand image — not the casual games that are skilled at advertising.
“If Apple hurts advertising and makes it much less efficient, then developers do become more dependent on Apple for exposure,” Seufert said.
But there is a way to pay for better placement in the App Store: Search ads.
Although tiny compared with Apple’s App Store revenue, which hit an estimated $21.7 billion last year according to Sensor Tower, its ads business is growing.
In January, Apple’s CFO Luca Maestri said that the company hit a record in terms of advertising revenue. The company hasn’t been more specific. The Wall Street Journal reported in 2018 that it delivered about $1 billion in revenue per year.
Apple’s search ads have an advantage over other ad networks because Apple doesn’t need to do cross-site tracking to identify people likely to buy — with search ads, the user already has signaled intent to download a particular type of app.
As app-install ads become less effective, more app makers may be driven to buy Apple’s search ads.
“Many advertisers will not accept the fact that they are kind of blind on iOS and Facebook,” said Kempe, and instead will come to rely on the more detailed information Apple can give them.
Apple called out this ads business in its last earnings call, while once again emphasizing privacy.
“The search advertising business is going well, there’s lots of intent from search,” Apple CEO Tim Cook said in a call with analysts in January. “We do it in a very private kind of manner, observing great privacy policies and so forth.”
View original post