Cheat Sheet: How Apple’s ATT is giving it more influence over ad dollars

Illustration of car driving in hills towards an Apple logo moon.

Editor’s Note: This story is part of a 10-part series that examines life after the third-party cookie. Visit this interactive graphic outlining the full series here.

Is Apple making a land grab for media dollars?

Something is clearly in the works. Apple’s plans for media dollars haven’t exactly been conspicuous — far from it. From new ad spaces in the App Store to new search tools that could one day be monetized akin to Google, Apple hasn’t tried to hide its interest in advertising. For the sake of brevity, however, we’ve focused on how those ambitions are manifesting through the App Tracking Transparency (ATT) privacy safeguard given its the clearest sign yet of Apple’s intentions.

Here’s what we actually know, broken down into eight main points: 

  1. Apple didn’t deprecate mobile identifiers on its platform in the way Google plans to do so for third-party cookies on its own. Instead, it put the choice in its customers’ hands — except there’s a chance many of them won’t be informed of what that means.
    Not every customer will know that their favorite, free apps might become unavailable if enough of them decide not to share their data. If any of those free, ad-supported app devices have to now charge a fee to make up the lost ad dollars from ATT then that benefits Apple, which takes a cut. That cut can range from 15% for small app developers to 30% for larger ones.
  2. Apple’s ATT prohibits app owners from offering users incentives or from withholding features as a way to get people to share their data. But media execs wonder why someone would opt-in to something like ATT if they didn’t think they were getting something in return.
  3. Apple presents ATT as an option for customers with a notification in their favorite app which gives them two choices: opt-in and allows that app to share their data with other companies or opt-out without consequences. That said, Apple hasn’t been exactly quiet on which choice it would prefer people made: the company is running high-profile ads that warn people of the perils of being tracked from their Apple devices — which, according to the ads, is only possible if they opt-in to ATT.
  4. ATT has broad limits on how data is used from those people who have opted out. “One of our B2C clients has concluded that if a user opts out then they can’t use any of that data whether it was part of the app or not for personalization of their advertising anywhere,” said a senior agency exec on condition of anonymity due to not being authorized to talk to Digiday. In other words, the opt-out has taken the user completely out of the audience group they would’ve served ads to in all scenarios. Regardless of the legality of this, few marketers would want to risk flouting those rules if it meant getting suspended from the App Store. Instead, they’re playing by Apple’s rules. 
  5. Since ATT launched in the spring, Apple hasn’t been asking for permission to personalize ads across apps like Apple News and App Store. It will, however, begin asking for those people who download the latest iOS 15 update. Sure, it may look like Apple is holding itself to the same standards as everyone else, but that’s only part of the story. The way Apple asks for this permission might raise an eyebrow or two as it significantly differs from the ATT messaging and other app providers. Essentially, it comes down to semantics: when Apple wants someone’s data to serve them relevant ads in the App Store and App News they’re asked to opt in to its “Personalised Ads” service, whereas other app owners have to ask users if they want to be “tracked” for ad targeting. Unsurprisingly, Apple believes the difference is more than just language. 

  6. The company’s head of software, Craig Federighi, explicitly told Joanna Stern of WSJ that Apple’s own apps (Music, News, Arcade, Fitness, TV) are exempt from showing the ATT prompt because “they don’t track users across apps they do not own.” Some ad execs aren’t so sure. They believe those apps do glean insights as part of the app store infrastructure Apple uses to enrich its own product innovations as evidenced by app developers in this recent senate subcommittee on antitrust hearings and lawsuits by Epic Games and Spotify. Apple, goes the thinking, privileges its own apps and ad tech when it comes down to business. 

  7. And those critics may have a point. Consider this: Apple’s ad targeting business still doesn’t fall within the remit of ATT despite how it may look with the new notifications. 
  8. Apple has been rapidly hiring execs for its ad platform in the run-up to and during the initial rollout of ATT. A quick search of Apple’s career site for the word “advertising” reveals they are actively investing in human capital to support this growing service (193 open roles at this moment).

What’s next?

Having purged third-party cookies from its Safari browser, and in the throes of throttling mobile identifiers from its ad platform, it’s no surprise that Apple is eyeing IP addresses as its next target. Apple’s incoming Private Relay will render a person’s IP address useless for fingerprinting because it redirects web traffic through two separate servers. Grim as it sounds, Private Relay isn’t the full-blown fingerprinting blocker it could be — it only obfuscates traffic coming from the web and a tiny amount of app traffic (specifically encrypted HTTP app traffic) — but that doesn’t mean it will stay that way. Doing so would give Apple even more control over advertising on its platform.

“Apple is looking very far into the future when it comes to the strength of their brand and the ability to sell their hardware is going to rely on their ability to build trust with consumers,” said Michael Bregman, chief data officer for North America at Havas Media Group. “The moves that they’ve made in the data landscape are a consequence of this.”

Are advertisers worried?

Yes, but maybe not as much as they did before ATT arrived. While some of them have shifted spending to Android where they aren’t limited in their ability to track which users, the shift hasn’t been as seismic as anticipated. “So I would expect most advertisers to acquiesce here — perhaps with meeting the challenge head-on and being more “creative” in their ads,” said Alan Chapell president of privacy law firm Chapell and Associates. “For example, using more contextual ads to ensure you are targeting the right users. These shifts will be super necessary since Apple’s users are still valuable to advertisers, and it’s just not practical to shift all of your ad spend to Android.”

What is Apple’s endgame?

Throttling the flow of media dollars around its App Store is a means to an end for Apple. Unlike Google and Facebook, the iPhone manufacturer isn’t dependent on those dollars. Those dollars can, however, help fortify the company’s influence over the App Store. Put another way: Apple has little control over what apps are popular on its platform. But if it can control the lifeblood of those apps (i.e. ad revenue) then those apps become more dependent on Apple both for advertisers and for attribution.

“Since Apple Advertising is now the only way to deliver personalized advertising to all iOS app users and to measure campaign performance effectively, app developers that rely on advertising revenue will become increasingly dependent on Apple,” said Loch Rose, chief analytics officer at Publics-owned Epsilon.

OK. But what happens to ATT if Apple is forced to loosen its grip over app distribution?

Before we dive into this question, it’s important to understand what made Apple do this. Apple’s dominance over the App Store has come into question during a public case between itself and Epic. The upshot of all this legal wrangling is that the iPhone manufacturer must cede control over how people pay for apps. The real issue, though, is what this signals for Apple moving forward.

While I do believe privacy is important to Apple, they ultimately also want to harm the efficacy of advertising outside of the App Store and keep users in their ecosystem.
​​Levi Matkins, CEO of mobile ad platform LifeStreet

At the highest level, Apple has two massive intertwined threats: first, there’s regulatory pressure to change its business practices; second, there’s the growing public perception that large tech companies grossly misuse user data to their advantage. The likelihood of alternate app stores and how ATT helps protect their business is a small but meaningful part of their protectionist strategy.

“Broadly, the way Apple has responded has been with proactive small policy concessions (i.e. allowing payments outside of the AppStore) and working tirelessly to craft an identity centered around user privacy (the anti-Facebook so to speak), even if it costs them in the short term,” said ​​Levi Matkins, CEO of mobile ad platform LifeStreet.

An example is its recent marketing campaign highlighting ATT changes that fear-mongers how other apps misuse data & positions Apple as the benevolent protector of it. In addition, Apple’s massively advantageous prompt gives them an edge in using data to power effective advertising.

It follows that if Apple is forced to allow alternate app stores, 1) it’s going to be a hard sell to convince users to trust others with credit card and personal information, and 2) they will be better positioned to enable more effective app discovery.

It may be the skeptical take, but It’s pretty clear that the driving force behind Apple’s ATT is not simply protecting user privacy. 

“While I do believe privacy is important to Apple, they ultimately also want to harm the efficacy of advertising outside of the App Store and keep users in their ecosystem,” said Matkins. “They see value now, and in the future, in being able to shape the ways in which apps are discovered and which apps to spotlight for people to download. This allows them to hold onto advertising dollars. And it’s worth pointing out that ATT also benefits Apple outside of App stores (ie. by hurting Facebook’s revenues & impact).”

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