How Apple's New Privacy Changes Are Affecting The Digital Marketing Market

The digital advertising world was expecting that Apple’s privacy changes would cause some trouble in the online advertising market. Now, reports have confined that the latest update is indeed affecting the ad business and e-commerce.

Under Apple's new updates, which were rolled out in June and July, apps must now ask users if they wish to be tracked. Many people have chosen to opt-out of being tracked by major apps like Facebook and Snapchat.

As a result, those applications have less information about consumer behaviours and interests and are unable to target ads as effectively, reported The Wall Street Journal.

It was reported that Snap Inc's stock dropped 25 per cent on 21 October after the owner of the photo messaging app, Snapchat, said Apple's privacy updates on iOS devices harmed the company's ability to target and track digital advertising.

During a conference call with investors, Snap Chief Executive Evan Spiegel noted that a new advertisement measuring tool supplied by Apple impeded companies' ability to measure the efficacy of their commercials, upending many of the ways advertisers have been accustomed to doing business for decades.

Additionally, he said: "This has definitely been a frustrating setback for us."

As reported, the beauty, fashion, and consumer goods industries account for a large number of marketers on Snapchat. The supply chain disruptions, according to Snap, impacted a wide range of advertisers from various businesses and geographies, reported Reuters.

Doug Anmuth, a JPMorgan analyst, said: "Apple iOS ad changes played out worse than virtually anyone had expected in Snap's Q4 outlook."

Along with Snap, social media giant Facebook, Google parent Alphabet Inc and microblogging platform Twitter all saw their stock prices drop between 2 and 4 per cent.

As per the latest report from WSJ, a Facebook spokesperson said: “Apple’s policy is benefiting their bottom line at the expense of businesses that rely on personalized ads to reach customers and grow their operations.”

ATT Changes

For years, a marketing strategy meant to target users who are most inclined to spend has boosted many of the apps that have topped Apple's App Store charts.

App install ads are sold by companies like Facebook and Google. They commonly appear as a pop-up or an item in a feed within other apps. Users who click on the ad are taken to a website in the App Store where they can download the advertised app.

These are a critical component of many companies' user acquisition strategies, particularly for e-commerce companies and casual games that rely on a small percentage of users purchasing a large number of in-game add-ons.

App install ads are frequently marketed on a pay-per-install basis. Ad buyers will often estimate how much a customer in a certain demographic may spend while using the app. If the cost-per-install is less than the anticipated lifetime value of the users targeted by the advertisements, the app manufacturer will purchase as many of those ads as it can afford.

But the ATT (App Tracking Transparency) change, as well as other Apple privacy modifications, endangers this paradigm by substantially lowering the amount of information marketers have regarding the effectiveness of their advertising.

App marketers can't tell if they're attracting the correct folks to install their apps until they have that information.

According to an early report, Apple explained its stands on users’ privacy while saying that “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,” it added.

“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,” the company noted.

An Apple spokesperson told Fortune that for the new rules, the company has received considerable support for this new feature from regulators and privacy groups.

But many of the companies, which are currently struggling to cope with Apple’s changes, reportedly said that they would pull back ad spend.

Meanwhile, Facebook, along with many of its advertising partners, claimed that its ads continue to drive more sales than its analytics reveal.

In September, Graham Mudd, who is the Vice President of Product Marketing in Facebook, wrote in a blog post that because of the Apple privacy change, the social media company is undercounting conversions —when Apple users visit a page and take an action, such as making a purchase —by about 15 per cent.