During this past summer of 2020, Apple announced their future iOS update on privacy and data protection. Expected to be rolled out in the Spring of 2021, Apple users will be offered the option to share or not share their data with applications downloaded from the Apple store. Sounds like a no-brainer, right?
Unfortunately, as you dig deeper into the details of the update, it isn’t quite as straightforward as Apple is making it sound. For marketers, it’s important to understand the nuances of the update and what they might mean for you and your clients.
How It USED to Work
Currently, apps can collect, analyze, and sell user data the second it is downloaded onto an Apple product. The data that is collected is then used by businesses and advertisers to create personal, targeted advertisements for each user. On average, a mobile app has six trackers coded into its system that collects this user data. Additionally, data brokers (companies that collect and sell data) can collect data on millions of consumers. These brokers can tag a user with over 5,000 characteristics, giving advertisers an almost exact persona of the user, allowing them to send a perfectly targeted advertisement.
Certain apps allow users to hide their personal information; however, this is not an automatic process. This requires the users to go into their settings on the Apple device and manually disable the privacy settings.
How It WILL Work: Details of the Update
With the upcoming beta update, Apple will be implementing “App Tracking Transparency” which requires apps to get permission from the user before tracking their data. When a user launches an app for the first time, they will receive a push notification on the screen asking if the app can track their activity across the app. The reason for this update is to give users the tools and knowledge to protect their personal information. Below is a screenshot of what this will look like according to Apple:
Apple’s senior vice president of Software Engineering, Craig Federighi stated, “Our goal is to create technology that keeps people’s information safe and protected. We believe privacy is a fundamental human right, and our teams work every day to it in everything we make.”
The Predicted Impact on Facebook Advertising
This Apple update is likely going to be problematic for the other tech giant, Facebook. Right now, Facebook allows users to download, browse, shop, and connect for free on the app. Facebook makes their profit by selling advertising space to businesses. These businesses purchase the advertising space and push their message to targeted users based on their data collected by Facebook.
After the new Apple update, Facebook can expect around 55% of its users to disable their privacy sharing settings. This is going to create a problem for small businesses that rely heavily on Facebook marketing (and in turn, Facebook itself). Small local businesses like restaurants and shops that cannot afford TV or radio advertisements utilize Facebook marketing to increase profits. They use Facebook’s data to advertise to potential customers that live close by and have an interest in their business. Without access to the data of Facebook users, it seems this will significantly impact these small businesses.
Online businesses that utilize Facebook data marketing will be noticeably impacted as well. Users who no longer choose to share their data will only have one “event” recorded on a website. So, if a user is browsing on a website, viewing items, adding them to a cart, purchasing an item, etc., only one of these actions will be recorded, whereas right now, all of these actions are recorded and sold back to advertisers. This means that a few things will happen:
- No more remarketing. For example, currently, if you are online shopping and add an item to your cart but do not purchase it, this item usually magically appears (it’s remarketing ☺) as a Facebook ad the next time you log on.
- Audience sizes will decrease. Once more users choose not to share their information, audiences will decrease in size. Users will be harder to target because businesses will not have complete data sets of their users for proper marketing.
- Facebook Ad use will decrease, so prices will increase. Due to this lack of data, businesses will no longer use Facebook ads as frequently as they do. This will not only result in a loss of revenue for both parties but will also force Facebook to increase the price of ad space forcing businesses to pay more.
Facebook is arguing that this update is a power move by Apple in attempts to profit more off mobile apps being sold on their app store. Once this update is implemented and apps like Facebook can no longer profit as much off advertising space, they might consider moving to a subscription model.
Will Facebook Move to a Subscription Model?
Subscription models sell a product or service on a monthly or yearly fee. Customers pay a continuous fee to continue to receive the product or service. So, depending on how much of an impact this privacy update has, Facebook may be forced to start requiring users to pay to belong to the social media site. If apps like Facebook move to a subscription model and are sold on the Apple store, Apple makes a profit. Apple collects a 30% cut of in-app purchases, commonly known as “the Apple tax.”
In Closing: What This Means for Your Business
It is difficult to determine Apple’s intentions with this new update – it is getting praise from privacy organizations and the general public as many Apple users are excited to be in control of their personal information. However, it is too soon to tell if this update will result in applications like Facebook forcing to pivot into becoming subscription-based apps where Apple will profit further.
As an agency specializing in Facebook PPC advertising, we use Facebook data all the time and find success. We believe that remarketing is helpful to consumers and relevant advertising has been a huge, positive step in the world of advertising in general (and for those who did not want to be involved, there was always an option to remain more private).
We will know more in the future once we see how the new update looks once it’s rolled out, but we don’t anticipate Facebook advertising going away – just changing. We will update this article with more information as it becomes available.