In 2021, Apple introduced to their iOS a new feature called “App Tracking Transparency”. This feature basically requires all applications to ask for permission from users to track their activity across other apps, and on the web. Obviously, this feature impacted companies that rely on advertising as a revenue model, since it made it harder, if not impossible in some cases, for these companies to harvest data of iPhone users and use it later for targeted advertising. To understand the magnitude of the consequences deriving from this feature, bear in mind that Meta said that the impact of Apple’s move on their business could be “in the order of $10 billion in 2022”.
Just last month, as if it wasn’t enough already, Google announced a similar move, saying that they will bring the Privacy Sandbox to Android. The Privacy Sandbox would share user data with third parties and operate without cross-app identifiers, including advertising ID. The advertising ID is a unique, user-resettable ID for advertising, deletable permanently by the user since Android 12, provided by Google Play Services. According to Google, Privacy Sandbox will phase out third-party cookies and limit covert tracking, enhancing user’s privacy and transforming Google in the gatekeeper of that data. A “cookie” is basically a small piece of data stored in the browser when a user visits a website. Google will still sell access to that data in the form of aggregated and anonymized data, meaning that companies like Facebook will depend totally on them for their ability to have a revenue stream. That’s an outstanding strategic move by Google, but at the same time a disaster for companies in the targeted advertising market, way worse than the policies adopted by Apple.
According to a report by The New York Times, being given the choice many users have opted out of app tracking for apps such as Facebook, putting their main revenue model in serious trouble: indeed, with less data from the user’s online activity, such as e-commerce and search queries and other social media surfing activity, it has become more difficult for the company to target specific ads. As a consequence, advertisers reduced the promotions running on the platform. Also, we have to keep in mind that iPhone users are those with the higher conversion rate and the higher spending through targeted online ads, so the problem is bigger. Furthermore, as the Privacy Sandbox will be released to Android, the damages done to Facebook’s revenue model could increase exponentially given that Android has the largest global share in the smartphone market. A Wall Street Journal report pointed out that, since Apple introduced those changes last year, the cost for small businesses to acquire customers through Facebook and Instagram went up, leaving them no choice but to shift their “whole ad budget” to search ads on Google.
Those changes do not impact other companies such as Google and Amazon, since they have access to first-hand user generated data through their queries on the search engine or the e-commerce platform, but will heavily impact companies like Meta, that rely on other platforms to gather the data.
