Ad tech Companies Prepare for a World Without Cookies
Apple's introduction of App Tracking Transparency in iOS 14 requires apps to obtain user permission before tracking across other companies' apps and websites, significantly limiting targeted advertising by removing access to the Identifier for Advertisers (IDFA) and building on previous privacy measures like Intelligent Tracking Prevention, thereby forcing ad tech companies to adapt to a new landscape where most users likely opt out of tracking.
At WWDC 2020, Apple announced a significant change with iOS 14: App Tracking Transparency. This requires app developers to self-report their privacy practices, clearly summarize privacy information in the App Store, and make it easier for users to see and control what data an app is collecting about them.
Katie Skinner, a manager for user privacy software at Apple, stated, “We believe tracking should always be transparent and under your control. So, moving forward, App Store policy will require apps to ask before tracking you across apps and websites owned by other companies.”
At the time, there were more than 100 million iPhone users in the U.S., and it was expected that most would choose “Ask App Not to Track,” making targeted advertising on iPhones and their apps nearly impossible.
Let's explore the new protection and how advertisers are adapting to these changes.
What Exactly Is Apple’s App Tracking Transparency?
In 2017, Apple released Intelligent Tracking Prevention (1.0) to limit the use of cookies on Safari by tracking service providers through a setting called “Prevent Cross-Site Tracking.” Since then, Apple has updated the technology and intensified its stance on privacy.
With iOS 15 in 2021, Intelligent Tracking Prevention became even stronger by hiding the user’s IP address from trackers, preventing advertisers from using the IP address as a unique identifier to connect online activity.
Apple’s App Tracking Transparency feature, launched with iOS 14, is essentially the mobile-app version. With this update, Apple effectively removed its IDFA (Identifier for Advertisers), which helps mobile marketers attribute ad spend, by giving iPhone users the ability to opt-in or out of data tracking. If a user opts out, advertisers cannot use IDFA to deliver targeted campaigns. This opt-in feature is used across all iOS devices, including Apple TVs.
While advertisers initially did not know the opt-in rate, it was estimated to be as low as 5%. According to Statista, the opt-in rate among those who have downloaded iOS 14.5 is around 25%. In other words, only 25% of iPhone users allow advertisers to track them.
With so many users concerned about tracking, the low opt-in rate was expected and is likely to increase.
All of this occurred as advertisers were preparing for a world where Google Chrome would drop third-party cookies. Advertisers will need to have a cookie alternative ready by 2024.
How Are Advertisers Responding?
In 2020, many industry leaders declared that Apple had effectively killed the IDFA. Alex Austin, CEO of Branch, said, “The IDFA is dead. There is no other way to interpret this.” Others, like Criteo CEO Megan Clarken, expressed uncertainty about the impact, predicting that the update would cut their earnings by at least $3 million in the following quarter.
Facebook also responded strongly, even taking out a full-page newspaper ad criticizing Apple. Without IDFA, advertisers would have no effective way to deliver ads to Facebook users on iPhones. Analysts estimated that the change would cost Facebook at least $12 billion.
Given the impact of Apple’s decision, the industry has moved quickly to find alternatives. The Trade Desk (TTD) is developing an open-form tool—Unified ID 2.0—to help the industry operate in a post-cookie world. This tool aims to give consumers an open ID that replaces cookies, provides consumer controls, and enables personalized advertising.
Where Does Programmatic Advertising Stand?
Programmatic advertising performed better than most other forms during the COVID-19 pandemic. MediaRadar data shows that the number of advertisers running programmatic ads increased by 26% between January and May 2020. In June, spending levels reached their highest point since the beginning of the year, down just 3% compared to January.
The types of companies buying programmatic ads shifted in Q2. Travel brands drastically cut spending, while categories such as media, home furnishings, and education/training increased spending.
Programmatic advertising was largely unaffected by Apple’s announcement at the time. As of 2022, the programmatic advertising market is expected to grow by $314.27 billion between 2022-2026, with a CAGR of 26.66%.
So far, programmatic advertising has not been significantly impacted by Apple’s changes. The next major test will come when Google officially sunsets third-party cookies.
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