Forthcoming new privacy features for the iPhone and iPad will make life harder for advertisers seeking to track and build profiles on users of Apple mobile devices.  According to Apple, an update to the company’s mobile operating system, iOS 14, will alert users with a prompt when an app wants to track them across apps or websites owned by other companies for advertising, or wants to share your information with data brokers. While no specific date for the update has yet been announced, Apple says it will arrive in early 2021.

Companies currently have automatic access to user behavior on the apps and websites because a user’s unique identifying number, an ID for Advertisers or “IDFA,” is shared with them by default.  To stop this sharing, users have to take the affirmative step of opting out through their device’s settings.  But that default is set to change.

Advertising industry insiders predict that in all likelihood, when confronted with a direct choice of whether or not to be tracked, most consumers will say “no thanks,” out of interest in protecting their privacy.  They predict that the current 70% of IOS users who share their IDFA with app publishers will drop to around 10% to 15% after the change. Advertisers are concerned that this will lead to significantly fewer data points, hindering their ability to target and measure ad campaigns.

The announcement of these changes has also stoked Apple’s already contentious relationships with major AdTech companies, such as Facebook and Google, that rely on targeted ads to generate revenue.  In doing so, it increases the tension between Apple CEO Tim Cook and Facebook’s Mark Zuckerberg.

What Exactly Are IDFAs?

In 2012, Apple introduced a tracking technology that facilitated third-party targeted advertising on iOS.  The technology assigns a randomly generated number – an IDFA – to a user’s device.  The user’s actions across all of his or her apps, such as clicks and page views, are logged, and tied to the IDFA, as opposed to a username or an account.   Apps can view IDFAs and their associated data and pass them on to advertisers, enabling ad servers to observe user interests and preferences.  This so-called “audience data” helps the server to make inferences about the user’s interests to determine what ads to show that user.  IDFAs also track user “conversion,” such as when a user downloads an app or buys a product, allowing advertisers to accurately measure the success of their efforts.  And because an IDFA only changes if a user resets it in his or her settings, IDFAs enable advertisers to build detailed profiles about users.

So how does it work?  Let’s say you recently found out that you were going to have a child, so you have been browsing parenting books on Amazon and searching for baby names on Google.  That activity gets associated with your IDFA.  Now, you open your local newspaper app, which is supported by advertisements.  Your presence on the app generates a call for an ad, which is communicated to an ad server along with your IDFA. The ad server sees the activity connected to your IDFA and infers from it that you might want to buy a baby monitor.  It serves the ad for the baby monitor and then keeps track of whether you click and/or buy it so that it can serve an even more relevant ad next time.

Notably, IDFAs have been automatically supplied to apps ever since they were introduced. A user could turn IDFA sharing off only by taking the affirmative action of navigating his or her device’s “Advertising” menu under privacy settings and selecting “Limit Ad Tracking.” Of course, the user would also have to know about IDFAs in the first place.

The profiles associated with IDFAs may technically be anonymous, but the sheer volume of information enables advertisers to make a host of inferences about you, including your location, race, gender, economic status, and interests.  This is a lot more sharing than most users think they’re agreeing to when they install a new app on their phone.

Sharing and Ad Revenues Expected to Decline

As mentioned, when the change goes into effect, IDFA tracking will no longer be automatic. Under Apple’s new policy, before an app can access a user’s IDFA, it will have to first ask for the user’s permission via a text prompt.  A user can either grant or deny the request.

That automatic tracking is no longer the default is significant. Experiments by psychologists and behavioral economists have long demonstrated that people are more likely to opt for the status quo when faced with a choice to change it.  Therefore, advertising insider predictions are likely on the money when they say most users will opt for the new status quo of no tracking.

Findings from early testing by Facebook’s Audience Network product suggest that advertising revenues will decrease once IDFA-sharing is no longer the norm.  Audience Network allows advertisers to use Facebook’s extensive ad targeting and management tools to serve ads across non-Facebook mobile apps by tracking users through IDFA data (and Google Android’s equivalent advertising ID) instead of a Facebook profile.  The study found that a lack of access to IDFAs caused a drop in advertiser revenue of more than 50%.  Facebook said the likely decrease in revenue may force it to stop offering Audience Network on iOS 14 altogether.

Apple Versus AdTech

Apple says that the change to its tracking feature is meant to protect its customers’ privacy and boost transparency, but advertisers consider it a power play. Facebook posted a blog complaining that the change wasn’t first floated to the developer and advertiser ecosystem.  Facebook suggested that not only will it be affected, but also small businesses that rely on targeted ads to find customers to generate revenue will be particularly harmed. A group of European marketing agencies, including some backed by both Facebook and Google, also condemned the change.

These criticisms add to the ongoing disagreements between Apple and Facebook. Cook has repeatedly disparaged big tech business models, which revolve around the monetization of users’ personal information. Cook says Apple has declined to exploit its users’ data in that manner, seeing it as incongruous with the company’s view of privacy as a human right. Zuckerberg rejects the notion that Facebook’s ad-supported business model is bad for consumers and has loudly defended Facebook’s data usage.  Zuckerberg has also struck back against Cook by levying veiled barbs about Apple’s business activities in China and calling the fees Apple charges developers to use its App Store “monopolistic,” an interesting choice of words for the head of a company that in December found itself on the receiving end of an FTC antitrust lawsuit calling Facebook an illegal monopoly.

When does this change become effective?

Apple’s altered IDFA tracking policy was announced on June 22, 2020 and was originally slated to be rolled out with the release of its iOS 14 update last fall.  But on September 3, 2020, the company said it would push back implementation to the beginning of 2021, giving developers more time to prepare for the changes.

Conclusion

It is unclear how Apple’s IDFA shift will impact the tech industry. However, from a data privacy standpoint, DDP believes that it is definitely a step in the right direction to give consumers meaningful choice in whether they are tracked. How it will ultimately play out remains to be seen.