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Apple Is Cutting Mobile Advertisers Some Slack

Mobile developers and advertisers have been scrambling to figure out how an upcoming change in Apple's (NASDAQ: AAPL) iOS 14 will impact their businesses. The forthcoming update will explicitly prompt users for permission when an app wants to use a device's Identification for Advertisers (IDFA) code, an alphanumeric string that is unique to each device, to track the person's activity for advertising purposes.

Facebook has warned that the change could crush Audience Network, the company's ad network that runs ads on third-party apps. Apple has now decided to cut mobile advertisers, including Facebook, some slack.

Image source: Apple.

The change will hurt app monetization

This week, the Cupertino tech giant announced that it would delay the enforcement of the changes until next year. The feature will still be included when iOS 14 launches this fall but Apple won't require developers to implement the prompt requesting permission until early 2021. Apple says it will provide more information around the change later this year.

"We are committed to ensuring users can choose whether or not they allow an app to track them," Apple wrote in a developer update. "To give developers time to make necessary changes, apps will be required to obtain permission to track users starting early next year."

It's rare for Apple to walk back a major feature, particularly one related to user privacy given the company has made privacy a significant point of differentiation for years. However, it's not as if Apple is overly concerned with Facebook's top line -- the company is recognizing that the change would reverberate throughout the ecosystem for mobile content, having broad impacts on third-party developers and their ability to monetize apps.

Developers will still need to provide users with additional details regarding what types of data an app uses, how that data is used, and whether that data is used for tracking purposes. The information will be shown directly in an app's listing page.

Disrupting a $45 billion market

Delaying the enforcement of IDFA controls will give developers some breathing room, especially as Apple has previously noted that 84% of all apps in the iOS App Store are free. Many of those are monetized through advertising, and Apple doesn't get any cut of ad revenue that those apps generate.

Image source: Apple.

Over the summer, Apple commissioned a study from Analysis Group on the size of the iOS mobile economy. It estimated that in-app advertising on iOS generated $45 billion in revenue in 2019. Nearly half (44%) of that ad revenue was derived from games. That's a massive market to potentially disrupt with the IDFA change.

Apple continues to strengthen user privacy across its platforms, which will inevitably keep creating conflicts with the mobile advertising industry going forward.

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends Apple and Facebook. The Motley Fool has a disclosure policy.


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