Cheat Sheet: As Apple preps IDFA crackdown for ‘early spring’, here’s everything you need to know

Facebook’s CFO David Wehner warned analysts yesterday (January 27) during the company’s latest earnings update to expect a dip in ad revenue once its ability to track user activity on Apple devices is throttled. And if Facebook is this worried, other platforms and advertisers will be too. 

As eMarketer analyst Nicole Perrin explained: “A lot of the focus of this discussion has been on the targeting side, but the attribution side of campaigns is important as well — losing access to cross-app tracking means less visibility into who makes a purchase after seeing an ad.”

Facebook has already shortened its default attribution window as a result of these privacy-related changes. To that point, Wehner mentioned one of the ways Facebook plans to mitigate the overall effects of the IFDA changes is by “providing more on-site conversion opportunities.”

Here’s a primer on why Apple is pushing a wrecking ball through the mobile ad market and what will be left in its wake. 

Why is everyone in a tizzy about Apple’s war on mobile advertising? 

First, it’s important to understand the tracking systems known as Identifiers for Advertisers. In a nutshell, it’s a mobile identifier or a string of numbers advertisers use to identify Apple device users across apps and subsequently build a much clearer picture of how they behave. Think of it like the mobile world’s version of a third-party cookie. As it stands, a user has to opt-out of sharing that information with advertisers and ad tech vendors, whereas Apple wants them to opt-in. But the more people refuse to share this data, the less there is of it for companies to profit from knowing how people behave in apps. Call it the IDFA apocalypse. 

Isn’t that a bit of an overstatement? 

Not really. No one knows for sure how many people will refuse to share their mobile identifier once they’re reminded they can, but even the optimists expect a large contingent. Even if opt-in rates are as high as 80%, as some analysts have predicted, that still leaves nearly a quarter of people who have refused to be tracked and are suddenly unrecognizable. It could hobble advertising operations, from frequency capping to campaign measurement, targeted ads to the attribution of app installs.

And some companies will feel the absence of those identifiers more than others like mobile app publishers. These are businesses that rely heavily on revenue from Apple’s App Store and have unknowingly built their revenue model on a sandcastle: one that becomes increasingly unstable and unsustainable with the removal of IDFA. This is also likely to affect the ad tech platforms that support these publishers.

“Once complete, the seismic shift will have far reaching implications including the obstruction of mobile app publishers being able to “know” or “see” their end user, as only a small percentage of users are expected to opt in to mobile identifiers,” said Travis Clinger, svp of addressability and ecosystem at LiveRamp. 

Why are some companies more worried about those losses than others? 

It’s not that one company is more concerned than the other per se. It’s that some companies like Facebook, which accounts for the bulk of ad-related downloads on iOS devices per AppsFlyer, have been especially vocal. And with billions at stake it’s easy to see why. In fact, the loss of IDFAs could slice off as much as 7% of Facebook’s total revenue in the second quarter. That amounts to $5 billion in lost revenue, according to mobile consultant Eric Seufert. Regardless of the final outcome, it’s likely to be significant. Otherwise, Facebook wouldn’t be telling everyone and anyone about its concerns. It even went so far as to take out ads in national newspapers to complain that Apple’s plan to make it easier for people to block ad tracking is bad for small businesses. Desperate times call for desperate (and somewhat ironic) measures.

What about Google? 

Of course, the search giant wants the IDFA to quarterback its in-app ambitions, whether it’s to attribute app installs or link what happens in-app to retargeting buys across all its products from programmatic to paid search. But pushing back against Apple would contradict its own positioning on privacy that has already seen it announce the death of third party cookies in its browser. Unsurprisingly, Google will not ask people whether they want to be tracked or not by its apps, and instead will stop collect IDFAs altogether. This means SKAdNetwork will be the de facto standard for measuring app installs, and all tech vendors will support it.

Wait. What’s the SKADNetwork? 

It’s Apple’s alternative to IDFA — except it’s not. SKADNetwork gives advertisers access to conversion data, but doesn’t share any user-level or device-level data. It all but kills ad targeting on Apple devices given there’s no alternative. In other words, advertisers have a small window to look through to see when someone has installed an app after clicking on an ad. Limited attribution granularity is the best an advertiser can get now.

“Because it is limited to 64 bit, it forces marketers to select between attributing a very limited number of KPIs to a decent number of campaigns or attributing more in-app events to a not so great number of campaigns,” said Hugo Loriot managing director at You & Mr Jones data agency fifty-five. “Another drawback is the timer constraints (set to 24 hour), which is a challenge for marketers who optimize towards lifetime value or seven-day revenue.”

Is the industry prepared for all this disruption? 

No. The industry is slowly bracing for Apple’s changes, but delays in getting ready has already forced Apple to postpone the launch by a few months last September. Still, some progress has been made. Google’s FLEDGE is a concrete example that should be able to mitigate the repercussions of ATT in the long run — but still complying with Apple’s spirit, said Sergio Serra, Product Management at InMobi. 

“While this clearly shows there are ways around the problems, we cannot deny players that are used to heavily capitalize on their datasets will need to absorb a sizable hit in the short run,” said Serra. “Mitigating the iOS14 ramifications will take Google and the ecosystem a good amount of time, and this will be surely reflected into their financials.”