Advertising Stocks Face New, Major Challenge With Apple’s iOS 14
August 05, 2020
Lead Tech Analyst
In my latest Forbes article, I discussed a lesser-known announcement from Apple last month in regards to the required opt-in for the ID for Advertisers (IDFA).
The IDFA is a number tied to the device that allows ad exchanges to track user interactions and behavior. The primary function is very similar to cookies in that it helps ad companies store data profiles and preferences for personalized messaging, regardless of which device you are logged into. In addition to targeting, the IDFA also helps with attribution and measurement.
If you’ve never heard of the IDFA or are not aware that a number is assigned to your iOS device to help track you, it’s because this has been opt-out in the past and been hidden inconspicuously in your Settings. In the upcoming release of iOS 14 in September, Apple will make this an opt-in for every single application. This means a message will appear for every application using a mobile device ID asking for permission.
This new feature will affect companies who offer mobile targeting, such as Google, Facebook, Twitter/MoPub and The Trade Desk. In the interim, it could also affect any applications that use aggressive growth tactics. This list is harder to identify, but Uber and Lyft, for example, are known for spending heavily on user acquisition to drive installs.
Fortunately for mobile ad industry there’s still time. The changes will not take effect until September with most devices running the iOS update by October, so no financial impact will be seen until Q4. However, if brand ad spend remains low from the pandemic, and direct response campaigns will now be blind due to an aggressive move against mobile ad targeting, then investors should expect a significant shift in the ad industry by the latter part of the year.
The changes to the IDFA are being done under a privacy guise, however, it could be an attempt for Apple to reclaim valuable revenue streams from its ecosystem as iPhone penetration is maxed out. How this would work is not evident right now but its unlikely that a $118 billion market in iOS app install spend has gone unnoticed.
Privacy in this age of “data everywhere” is a valiant mission, yet there could be more to Apple’s decision as the company has built a very cash efficient ecosystem with many companies profiting from the $100 billion+ industry of mobile app installs.
There is clear evidence as to the importance of direct response in this quarter’s earnings calls thus far, yet mention of the IDFA has been absent from analyst questions despite being one of the biggest threats the mobile ad industry has ever faced. There is a major disconnect between the first few earnings calls in ad-tech talking up the strength of direct response ads and how people who work daily in the mobile ad industry view the IDFA being deprecated. John Koetsier, a journalist and consultant for Singular who covers this space extensively, believes this is a “huge problem for a massive industry.”
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