Losing track: The impact of Apple's 'do not track' feature on programmatic ads

The tech world woke up to a new reality in late October. A reality where Apple made a small change to iOS that could potentially have a huge impact on the digital space. That change is the well-flagged move to offer ‘do not track’, or identifier for advertisers (IDFA), functionality within its system as the default option rather than requiring a deliberate selection. A tweak, in other words, but a hugely consequential one. The first signs of the implications of this change came with the third-quarter results from Snap. The maker of Snapchat said it missed its revenue guidance by $3m due to the implementation of the changes. On a call with analysts, CEO Evan Spiegel laid out why the issue had caused the surprise earnings shortfall. “Our advertising business was disrupted by changes to iOS ad tracking that were broadly rolled out by Apple in June and July,” he told analysts. “While we anticipated some degree of business disruption, the new Apple-provided measurement solution did not scale as we had expected, making it more difficult for our advertising partners to measure and manage their ad campaign for iOS.” Chief business officer Jeremi Gorman put some flesh on the bones of this failure to scale. He pointed out every advertiser has their own unique, fine-tuned perspective on their optimal parameters to measure ROI for their business. But Apple’s StoreKit Ad Network requires them to use Apple’s fixed definitions of advertiser success. Gorman pointed out that advertisers were now no longer able to understand the impact of their unique campaigns based on metrics such as time between viewing an ad and taking an action, or the time spent viewing an ad. “Additionally, real-time campaign and creative management is hindered by extended reporting delays, and advertisers are unable to target advertising based on whether or not people have already installed their app,” he added.

Price impact

Credit Suisse analysts noted that in the wake of the comments from Snap, technology shares were sold off and that included some of the companies involved in the online betting and gaming sector. “There are two lines of impact,” said analyst Ben Chaiken in a note to clients. “First is for the app developers/publishers who may see lower revenue yields as it is more difficult to show more high-value, targeted advertising.” In areas like free-to-play, he suggested that where the revenue model relies on advertising spend, this could begin to lower competition for eyeballs and potentially lower acquisition costs for the competition. “In other words, if you have a harder time monetising your user base through advertising, you likely won’t have the same ability to acquire new users in the first place,” Chaiken wrote. The second issue, he continued, was from an advertising perspective as it was also now more difficult to find the highly motivated user without the previous level of granularity, which theoretically could result in lower conversion rates and, hence, potentially lower ad pricing. “Both of these factors will likely result in changes to how marketers price advertising for the time being,” he added. “Further, it feels to us like the most desirable sports betting apps/mobile games will gain even greater market share at a lower cost, and the tail will move in the opposite direction.” Chaiken’s thinking here, he suggested, was that the most desirable and/or sophisticated sports betting apps and mobile games may now face lower competition for eyeballs, such as through lower competition in free-to-play, as well as from smaller competitors in the market that simply don’t have the resources or the personnel to make the necessary adjustments.

No surprise

According to Fintan Costello, managing director of Finder Media, no one should have been surprised by the ‘do not track’ move given the amount of advance warning Apple gave prior to the introduction of the changes. He suggests people working in the marketing departments of online betting and gaming have never really had access to the full suite of tools available from the likes of Facebook and Google. Subsequently, he believes the impact on the betting and gaming sector will be less than in other sectors. “The industry will adapt and adjust its CPAs. You are basically buying inventory that is less good.” The big move, he suggests, will be in programmatic. “You will lower your bids, you won’t be as confident as before,” he says. “But you could easily end up spending more money.”

Nothing comes for free

The other immediate impact, as noted by Credit Suisse, comes in the free-to-play arena. But again, Daniel Kustelski, chief executive and founder at Chalkline, suggests there are ways to overcome the worst of the ‘do not track’ impact. “The best way to mitigate the impact is to collect as many email addresses or phone numbers as possible (plus more) from the players you can reach before the privacy changes go into place,” he suggests. “Then, responsibly continue to communicate with those players as privacy changes take place. Everything we do starts with building a trusted relationship with players as they learn about sports betting. Educating those players is the central starting point for mitigating the impact.” Kustelski adds that, more generally, he believes all operators will be worried about what the changes might mean. “That said, most operators know that the sooner they engage, educate and acclimate their players in a permission-based marketing approach, the stronger their marketing model becomes,” he adds. Chalkline’s CEO also rejects the suggestion that the changes will disproportionately affect smaller operators in any given market. “We believe that operators of any size that embrace new privacy regulations, responsible gaming and the new reality of asking for personal data will be the ones that thrive as these changes roll out and will fare the best,” he adds. “To recall the premise of an old favourite movie: ‘Do you want to play a game?’ will always be met with an enthusiastic response from an interested and passionate audience, and that’s what Chalkline believes will be the foundation for solid player relationships going forward.” Costello believes, moreover, that the opportunity will be for operators to simply reallocate their marketing resources to other areas such as SEO or affiliates. “If it gets even less efficient, the industry will reallocate accordingly. Buying media on sports media has become more valuable; you can shift more towards more known entities. This isn’t just the US market. The UK, for instance, is way more sophisticated.”

And the winner is…

A recent article looking at the new landscape post-Apple’s changes made the point that one of the (perhaps) ironies of the move is that it will lead, as Costello suggests above, to advertisers moving more of their ad spend to Google. “The walled gardens just get bigger,” Costello warns. This might suit those with established brands. “The companies that invest in their brands, with a share of voice, will do well,” he adds. But is anyone doing a particularly good job? That’s a different question.