During its annual Worldwide Developers Conference, Apple unveiled some new features to its new IOS 14.5 software update. However, the feature that has generated much attention is Apple’s changes to its advertising policy. The company is pushing for greater privacy and transparency within its ecosystem, allowing users to decide whether or not they want to share their data with third party advertisers.
Apple has introduced App Tracking Transparency to its over one billion devices. This new feature requires applications to ask users’ permission when it wants to track user activity across the internet. It basically consists of a prompt initiated every time an app or service wants to track user data and internet activity to offer more personalized ads from third parties.
That is why this new update is creating so much buzz; this data is crucial for effective targeting and could shake up a $105 billion mobile ad industry. When you ask someone whether they want to be tracked or not, the majority will likely say no. Indeed, a study from TapResearch found that 55% of people surveyed said they would not let Facebook track them across apps if they were prompted.
How does the new update work?
On every Apple device, there is something called the Identifier For Advertisers or IDFA code. It is a set of random numbers assigned by Apple to a user's device, so advertisers can use this to track their activity (excluding personal information) and compile data so they can deliver customized advertising.
So for example, Mr Hachi is tired from a long day of work and decides to relax by downloading a new meditation app. When he uses the app, it records its IDFA number. Apart from the meditation app, all other apps on his iphone, including Facebook also have a record of Hachi’s IDFA number.
So if the meditation app is free and wants to make Hachi upgrade to its subscription plan, the app will run a Facebook ad. If Facebook checks its database and finds Hachi’s IDFA number, an ad about the meditation app will appear on his Facebook or Instagram feed. Another way is if the meditation app runs ads, it can use Facebook’s ad network, which uses your IDFA number to keep track of your other interests, so it can display highly personalized ads when you're using it.
Now, Apple is turning off the tracker by default. If an app wants to track your activity, it will have to ask. In fact, users can opt out of all tracking by default, by simply going to settings and turning it off. So why is Apple doing this? The company has said it wants to give people a choice about whether or not they want to be tracked.
According to Apple to CEO Tim Cook
- “Technology does not need vast troves of personal data, stitched together across dozens of websites and apps, in order to succeed”
- “If a business is built on misleading users, on data exploitation, on choices that are no choices at all, then it does not deserve our praise. It deserves reform.”
What is Facebook's grudge?
Facebook is a multi billion dollar conglomerate with a revenue model built on highly personalized advertising. The company made over $80billion in 2020 and already announced revenue of over $14billion during the first quarter of 2020. This revenue has been largely generated from a singular source: advertising, which accounted for over 97.9% of its revenue in 2020. Businesses use Facebook for two major reasons
- its ecosystem of over 2 billion users
- its ability to either sell this data to ad brokers and advertisers, or target and place highly personalized ads on user feeds.
Apple’s new feature update has threatened this business model. Over the years there have been growing concerns over how Facebook gathers and uses customer’s data, attracting criticism from regulators and other tech companies.
However, Apple’s new moves take it to a whole new level. By asking users to voluntarily decide whether or not advertisers like Facebook can use their data, Apple has effectively driven a wedge into Facebook’s business model in over a billion IOS devices worldwide.
To be clear, Facebook does not need to ask your permission to track you within its ecosystem; you agreed to those terms when you create a profile on Facebook, WhatsApp or Instagram. However, it also wants to know how you interact with other companies’ apps, or to track you across websites you visit.
It wants to know what you are searching on google, or what updates you have on your Linkedin. Personalized advertising is all about having a complete picture of a user. If you do not update your professional details on Facebook or Instagram, it may not know how to deliver clickable ads to your feed because you declined to track your Linkedin or other social media.
This is why Facebook is going all out, arguing that Apple is acting out of self-interest. Facebook says Apple is attempting to push free apps to move to subscription models. It notes that Apple, through its App Store, collects a 30% cut of in-app purchases, which it dubbed "the Apple tax."
Facebook says it is “standing up to Apple for small businesses everywhere”, stating that “many in the small business community shared concerns about Apple’s forced software update which will limit businesses ability to run personalized ads and reach their customers effectively”.
What does this mean for advertising in Africa?
A survey conducted by Benjamindada.com found that Facebook ads is one of the most preferred method of advertising among marketers in Africa. It is no surprise; the company has roughly 200 million users in Africa, while Instagram and Whatsapp are the dominant players in the mobile market.
E Commerce is also seeing a boom in Africa. The countries with the highest share of the internet include Nigeria, South Africa, Kenya, Libya and Mauritius. There are over 180 million online shoppers in Africa, with Jumia seeing 516 million website visits between 2017-2019, and the average B2C e-commerce spending per online shopper in Africa is estimated to be around $70.
Facebook is one of the most popular ways these businesses reach Apple’s million of African users. Apple may say its intentions are noble, but this move will indeed have a huge negative impact on businesses and how they can offer products and services to the millions of Africans that are using IOS devices and also Facebook’s products.
Olabinjo Adeniran, a marketing expert and Growth Partner at Future Africa, tells Benjamindada.com that Apple’s new update might force marketers and advertising companies to be more creative and optimize for less metrics, due to the incomplete data on the target audiences. He notes that “it will also mean an increase in customer acquisition cost. Marketers have already begun complaining about lower conversion rates and increased acquisition costs on IOS”.
So are Apple’s intentions purely altruistic, or is there more to the privacy excuse. Olabinjo believes there is more to Apple’s intentions. He states that “Apple is basically telling a good story outside but doing something different inside. It is going to build its own ads network and use the data it is aggregating from users to position itself as a primary custodian of user habits and data”.
This does not seem too far fetched, especially since curiously, Apple users cannot opt out from Apple tracking their activity, since “it does not sell the data of its users”. Curiously, Apple recently hired a former Facebook executive, in what may seem like a move to bolster its move into the ads business.
Like Olabinjo notes, it may be that Apple plans to centralize and consolidate all forms of targeting and reintroduce its own sanctioned mechanism, where it may then have the leverage to charge a percentage to improve targeting and conversions.
Whichever way it plays out, Apple’s aggressive privacy measures may be putting competitors like Facebook on the back foot, but they could also invite even more scrutiny to its dominance of the app and internet economy.