Apple’s privacy change could increase the power of its App Store

NEW YORK, NEW YORK – SEPTEMBER 20: Apple CEO Tim Cook welcomes customers at the grand reopening of the Apple Fifth Avenue wholesale store on September 20, 2019 in New York City.

Taylor Hill | WireImage | Getty Images

The digital advertising world is scrambling to prepare for seismic change as Apple updates its iPhone software in the coming weeks.

The move, called Transparency Tracking App (ATT), forces app makers to apply for permission before they can collect a unique identifier on all iOS devices known as the IDFA. It is expected that many consumers will say no. Today, developers and advertisers use the IDFA to target mobile ads and measure their effectiveness.

Apple has consistently said that the change to its platform, announced last June, is all about privacy.

However, digital advertising professionals say there could be a side benefit for Apple: More power over its App Store, giving Apple more control over the types of apps that gain millions of popularity and full through Shop.

In particular, it could make it harder for app makers to entice customers to download their apps through in-app ads. That could help Apple instead direct users to the apps it chooses to identify in the App Store for their own business purposes. For example, Apple could pull more games through subscription fees (where Apple gets a continuous cut), and fewer steep social games that save big bucks through in – app purchases (which potentially detracting from the overall iOS gaming experience and damaging the Apple brand).

The move could also place ads on Apple itself, which are ads for app downloads that appear directly within the App Store.

Apple’s App Store and advertising industry are reportedly part of their services business, which the company has identified for investors as a growth engine. It generated revenue of $ 53.8 billion in fiscal 2020, up 16% from the previous year.

“Apple is able to take out the high moral ground, I think, saying they are targeting consumer privacy. But in reality, they have succumbed to its discovery. app to Facebook and Google and merchandising. What I see is trying to regain that control, “said Brian Bowman, Head of Consumer Acquisition, a digital advertising company with a focus on customer acquisition.

When contacted for comments, Apple reaffirmed its commitment to privacy.

“We believe that privacy is a fundamental human right and that consumers should have transparency and choice in how their data is collected and used. We have invested in technologies maintains privacy for decades, with Intellectual Security Barriers in Safari, Privacy Labels on the App Store, Apple Login, and Transparency Tracking App.Our privacy features apply to all developers – including Apple . But users of the Transparency Tracking App will not see encouragement from Apple because we do not monitor users. “

How app installation notifications work

For years, many of the apps that have topped Apple’s App Store charts have been overshadowed by a marketing strategy designed to target consumers who are more likely to spend.

Companies like Facebook, Google, and TikTok sell app installation ads. They usually appear inside other apps as a pop-up or as an item inside a feed. When users click on the ad, they are taken to a page in the App Store to download the advertised app.

App installation ads are a key part of the customer building strategy for many companies, especially e-commerce and casual games companies that rely on getting a small fraction of users to buy lots of add-ons alongside inside the game (these users are sometimes referred to as “whales”). App makers will spend $ 96.5 billion on app installation ads in 2021, or about a third of total mobile costs on ads, according to estimates from AppsFlyer, which makes advertising software for app makers .

That’s because they’re effective. Sensor Tower, an analytics firm that monitors app stores, released a study Thursday finding that references from other apps accounted for 20% of new app installation on the App Store in 2020. It was the same a larger store did direct searches on the App Store, which accounted for 59% of installation.

Mockup of a popup window will see iPhone users before using an app that monitors their data. This image was provided by Apple.

Apple

App installation ads are often sold with a per-installation price, ranging from a penny to tens of dollars. The buyers of the ads usually estimate what a customer will cost in a particular demographic during their time using the app, and make a simple mathematical judgment. If the price-per-install is less than the estimated life value of the people targeted by those ads, the app buyer buys as many of those ads as he or she can afford.

The ATT change, and other Apple privacy tweaks, threaten this model by significantly reducing the amount of information marketers have about the effectiveness of their ads. Without that information, app marketers can’t tell if they’re getting the right people to install their apps.

“When you look at the companies that are investing $ 6 [million] to $ 20 million per month, every month for 18 months to get a refund, all that stuff will be obscured very quickly, when Apple releases that version, “Bowman said.

Casual game apps, which often appear on Apple’s Top Grossing charts, are more likely to be hurt. Games are a big part of the Apple Store business, representing 65.8% of platform spend, according to Sensor Tower estimates.

For games, references are the main source for downloads, driving 38% of first-time installations in 2020 – more than people checking directly through the App Store, according to Sensor Tower.

“The main growth strategy is ads for most, if not all, mobile gaming companies. There are no gaming companies that don’t use them,” said Eric Seufert, author of Mobile Dev Memo, who has a background in customer building for game companies.

Unity, a company that makes game and advertising software for small developers at the top, warned in February that the IDFA change could change “the way mobile game developers get players purchase and how to deliver the best value for lifelong consumers. “

Andre Kempe of Admiral Media, a marketing company aimed at mobile app publishers, believes Apple’s change could force gamers to change the way their games work. Instead of relying on a few large consumers, they may need to target larger numbers of people to spend smaller amounts.

“As soon as they understand, okay, I have to make money with this, then some product manager would say, okay, we have to put a pay screen somewhere on the first level, which is not You’ve seen it before, so the user experience will change a bit, “Kempe said.

Yes, Apple sells ads

There are over 1.8 million apps on the App Store, and app marketers say apps can’t rely on people finding them on the App Store, or waiting around for Apple to reveal them.

“This is too much of an option, because you go in there, and you can access and download anything for the most part on the free-to-play side, from a game standpoint,” he said. TS Kelly, head of analysis at Carat, a media group, said.

Apple prefers to promote elegant, beautiful apps within the App Store that match its brand image – not the advertising-skilled casual games.

“If Apple hurts advertising and makes it significantly more efficient, developers become more reliant on Apple for openness,” Seufert said.

But there’s a way to pay for a better place in the App Store: Find ads.

While tiny compared to App Store’s Apple Store revenue, which hit about $ 21.7 billion last year according to Sensor Tower, its advertising business is growing.

In January, Apple CFO Luca Maestri said the company hit a record in terms of advertising revenue. The company hadn’t been more specific. The Wall Street Journal reported in 2018 that it delivered approximately $ 1 billion in revenue annually.

Apple search ads have an advantage over other ad networks because Apple doesn’t have to do cross-site tracking to identify potential buyers – with search ads, the user has already stated that to download a particular type of app.

As app-install ads become so effective, more app makers may be led to buy Apple search ads.

“A lot of advertisers won’t accept that they’re a bit blind on iOS and Facebook,” Kempe said, and instead will rely on the more detailed information Apple can give them.

Apple cited this advertising business in its last employment call, again emphasizing privacy.

“The search advertising industry is going well, there’s a lot of intent from scrutiny,” Apple CEO Tim Cook said in a call with analysts in January. “We do it in a very private way, overseeing major privacy policies and so on.”

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