How Apple’s IDFA changes will impact developers & marketers in 2021.
A feature in iOS that led to a vast ecosystem of advertising-supported apps is going away. Here’s what advertisers, developers, and consumers can expect over the coming months.
An Overview of the IDFA and its Uses
IDFA stands for “Identifier for Advertisers.” It is a unique key assigned to each iOS device and used by developers to identify that device without requiring users to provide other information about themselves.
The IDFA remains the same across all apps that a user installs on their device, and is primarily used to track users between these different apps. On its own, it’s a randomized, anonymous identifier and contains no information about a user. However, apps can store the IDFA alongside personal information that a user has provided to an app and they can use it to connect data about a user across different apps.
Privacy-minded users can reset their IDFA from their device settings or disable it altogether. Today, about 30% of iOS users have chosen to turn on the “Limit Ad Tracking” option in their device, which has the effect of disabling the device’s IDFA.
Mobile developers often use the IDFA for one or more of the following reasons:
Personalized Advertising
Advertisers often collect the IDFAs of people who use an app to show personalized ads to those people in other apps. This advertising technique typically happens via automated means and on a big scale.
For example, every time someone browses an item on the eBay iOS app but does not buy it, eBay may automatically share each person’s IDFA with an ad network. That ad network will then leverage its integration with hundreds or thousands of applications to maximize the chance of showing a relevant ad to each user and enticing them to return to eBay and complete a purchase.
In some cases, the personalization is more generic. An advertiser may choose to target a list of IDFAs corresponding to users that have expressed interest in a topic such as Sports or Fishing. Lists of IDFAs linked to user interests and demographic categories are sometimes sold or made available through advertising platforms. For example, a flight ticket app may sell a list of IDFAs of devices belonging to likely travelers to a hotel app. Alternatively, an advertiser may choose to target users interested in Travel when they work with an ad network on a new marketing campaign.
Advertising Attribution
When advertisers run a promotion, they may work with many ad networks. These ad networks facilitate the display of an advertisement in tens of thousands or even hundreds of thousands of other apps.
Advertisers use specialized analytics software to credit each app that helped them achieve their advertising goals. This software defines how much each app should get paid proportionally to the value they have provided that advertiser. This practice is called “Ad Attribution,” and it’s an essential component of online advertising.
Want to read this story later? Save it in Journal.
Attribution also helps democratize the advertising ecosystem by enabling any developer to build an app, show ads, and get paid fairly.
In some cases, advertisers use attribution software to split payment between multiple developers that show the same user an ad if they determine that the campaign led to the user making a purchase. This practice is called “Multi-Touch Attribution.”
Fraud Prevention
While less common, IDFA can be a useful identifier to predict fraudulent activity. Fraud prevention companies sometimes aggregate lists of IDFAs that they see taking legitimate or suspicious actions across various apps. They can use this as a signal to identify potential fraudsters using stolen credit card numbers or engaging in other malicious behaviors.
Settings Storage & Recovery
Apps sometimes use IDFA to identify if you are someone who newly installed an app, or someone who has previously used the app and that you have now re-installed it. Using IDFA as a key to store data about a user is not always reliable, since users can disable or reset their IDFA in their device settings. Still, it can be a useful way to restore any user-data without forcing users to create and log in to an account.
The History of the IDFA
Since the introduction of the iOS App Store in 2008, developers have sought ways to uniquely identify various users that install their apps to show personalized advertisements to those users, or so that they could identify which advertising channels were bringing them the best users.
The initial lack of a standard method led developers to adopt many options, such as the device’s Wi-Fi Mac Address, an internal device id called the UDID, or even a device’s copy-and-paste clipboard.
Seeking to standardize how developers implemented this behavior and to provide customers with more privacy controls, Apple began to remove support for these methods of user tracking in 2011 along with the release of iOS 5. Finally, in 2013 with the launch of iOS 7, Apple released formal support for the IDFA and began to require its use as a replacement for previous tracking methods.
Google followed a similar approach for the Android operating system when they introduced their version of the IDFA, called the “Advertising ID” or AdID in 2013.
Big Changes are Coming
In mid-2020, Apple announced that they are making changes to the availability of the IDFA. The difference is that developers will need to ask and be granted explicit permission from users before getting the device’s IDFA. To obtain permission from users, developers must display a dialog box with a warning and will need each user to click “Allow Tracking.”
Developers can customize the non-bolded text in the dialog. Industry experts believe that, even with the supported text customization, the opt-in rate on this dialog will be so low that this change virtually eliminates the IDFA as a feature.
“I’d be shocked if more than 5% of people opted in.” — Alex Austin (CEO, Branch)
Applications that attempt to get the IDFA without first displaying this dialog will get a series of 0’s as the device’s IDFA.
Apple scheduled to roll out with the launch of iOS 14 mid-September 2020 but later made the unusual decision to delay the change until “early 2021.”
To continue to support some form of advertising attribution without IDFAs, Apple is rolling out a new feature called SKAdNetwork. We’ll cover some of the details on SKAdNetwork below.
Can other identifiers be used instead?
Apparently not! Apple’s updated developer terms say developers may not share any identifiers obtained from iOS users with advertising networks or data brokers.
With iOS 14, iPadOS 14, and tvOS 14, you will need to receive the user’s permission through the AppTrackingTransparency framework to track them or access their device’s advertising identifier. Tracking refers to the act of linking user or device data collected from your app with user or device data collected from other companies’ apps, websites, or offline properties for targeted advertising or advertising measurement purposes. Tracking also refers to sharing user or device data with data brokers.
Examples of tracking include, but are not limited to:
* Displaying targeted advertisements in your app based on user data collected from apps and websites owned by other companies.
* Sharing device location data or email lists with a data broker.
* Sharing a list of emails, advertising IDs, or other IDs with a third-party advertising network that uses that information to retarget those users in other developers’ apps or to find similar users.
Companies may be able to get around these terms by having users log in to their service outside of an iOS application. For example, Twitter can use your email or phone number for tracking and ads personalization on other apps or websites if you log in to Twitter via the Twitter.com website, but perhaps not if Twitter obtains this information from their iOS application alone.
It’s unclear whether Apple will widely enforce a rule prohibiting developers from using email or other identifiers for cross-app tracking, advertising, or attribution. Even if Apple does choose to enforce this, they can’t easily know when a developer is violating this policy.
What is for sure is that Apple is intentionally dealing a significant blow to the advertising industry’s existing practices and that Apple does not have much sympathy for companies that rely on targeted advertising as a revenue channel or user acquisition method.
Is SKAdNetwork a Suitable Alternative to IDFA for Attribution?
What is equally as crucial as personalizing ads is the ability for advertisers to know who to pay for users they acquire through their advertising campaigns, and for developers to get fairly paid when they show ads to their users.
Apple’s new SKAdNetwork framework is a way to do a minimal form of attribution and install measurement without any device-level tracking such as the IDFA. Instead of a developer knowing whether a user discovered an app through a specific partner or ad network, SKAdNetwork will merely tell developers how many users came from each partner or ad network.
Furthermore, SKAdNetwork has a limit of 100 campaigns. This limitation means that a common practice of having a wide range of variations of an advertisement, and tracking how each variation performs, is now more difficult or impossible at scale.
SDAdNetwork massively reduces the granularity that developers previously had to attribute which advertising channels were effective or to optimize their campaigns.
SKAdNetwork also provides no capabilities related to allowing developers to retarget their existing users.
The limitations of this method are so considerable that developers are hoping to instead rely on less-accurate IP address tracking for attribution. Still, it remains to be seen whether Apple’s policies will allow IP address tracking as an alternative to SKAdNetwork, or how Apple would even enforce such a limitation.
Why Did Apple Delay the IDFA Changes?
After initially informing developers that the IDFA changes would happen alongside the release of iOS 14 in mid-September 2020, Apple changed its mind several months later and revised the timeline to “Early 2021.”
Apple’s provided this statement to TechCrunch:
We want to give developers the time they need to make the necessary changes, and, as a result, the requirement to use this tracking permission will go into effect early next year.x
Reading between the lines, Apple may have underestimated the magnitude of the impact that these changes will have. Apple recognized the importance of giving developers extra time to adapt their business models and apps for these changes.
Another theory is that Apple was worried about the user experience that would occur if developers did not have the necessary time to change how their apps work. Imagine if many applications all began to display Apple’s new permission dialog requesting permission to track the user at the same time. This could easily scare consumers right before the holiday season and lead to bad press.
The delay of Apple’s IDFA changes will help minimize negative impacts on developers and advertisers during the upcoming holiday shopping season and give them more time to adapt their software and business models.
How Will This Affect Developers?
It’s hard to overestimate the financial impact this will have on many mobile developers that rely on advertising for their business.
The click-through rate on ads is already low, but non-personalized ads perform three times worse. Furthermore, reduced accuracy in attribution will make it much harder for advertisers to partner with developers and pay them fairly. The removal of IDFA may lead to revenue declines of 66% or more for iOS developers that rely on advertising to support their businesses.
Sadly, these changes will also impact smaller businesses much more than big ones.
Ads purchases through Facebook’s ad network are targeted and personalized to users based on Facebook’s extensive user data and tracking within Facebook’s platforms like Instagram, Whatsapp, and newsfeed. Similarly, ads purchased on Google will still work just fine on Google’s properties, including Search, YouTube, and Gmail. These “Closed Garden” platforms can continue to personalize ads and track users without the IDFA.
Apps that depend on outside ad networks to connect with advertisers, such as Facebook’s “Audience Network” ad network, will be the most impacted. Early estimates indicate that these changes will result in a greater than 50% decline in advertising revenue. The expected revenue impact of these changes is so significant that Facebook is considering discontinuing its Audience Network product entirely.
As advertising becomes less effective outside of platforms like Facebook, Google, and Twitter, advertisers are likely to reduce their advertising spend and shift more into closed garden platforms where they can continue to target relevant users.
Over the coming months, many companies may have layoffs or shut down due to these changes. Media companies that are dependent on advertising revenue have already been struggling, and these changes will hurt them further.
As advertising budgets shift and overall advertising revenue declines for iOS developers, more developers will switch to paid subscription models for revenue.
Applications that want to continue to monetize via advertising will be much more likely to force users to create an account and provide their email address. Email is the best alternative to IDFA as a cross-application user identifier, even if using email for this purpose may violate Apple’s policies. Apple is already taking steps to discourage email-based user tracking through the “Hide My Email” feature in their “Sign in with Apple” product, which provides a mechanism for users to create accounts in apps without sharing their email address.
Apple stands to gain a lot from this. Apple does not directly make money from ads that monetize from advertising, but Apple does take up to a 30% cut of subscription payments. Apple has recently been working to grow the percentage of its revenue from services such as subscriptions. As more applications switch from ad-supported to subscription revenue business models, Apple will get a sizable portion of this new revenue stream. Apple may also benefit from improved device sales from users that want a device that makes it harder for advertisers to track them.
How Will This Affect Advertisers?
For many companies, advertising is going to get harder and more expensive.
Many existing channels will become less effective due to the reduced ability to target or personalize ads. For example, advertisers will no longer be able to re-engage existing users on iOS through retargeted ads. At least, not nearly as easily as they could before.
Instead, advertisers will focus more on running ads on closed garden platforms, and where they can target users based on interests or identifiers such as a user’s email. This change in focus will increase the demand and the cost of buying ads on platforms like Facebook, Instagram, Google Search, and others.
Businesses that rely on advertising to bring in users (such as many top-grossing mobile games) will struggle as it becomes more difficult and more costly to acquire users through less-personalized ads. The prevalence of “Mobile-First” businesses may decline as the web becomes a more attractive channel to build on.
These businesses will also shift much of their attention towards improving the engagement and retention of each user they already have. Marketers will switch their focus to engaging existing users via Push Notifications, In-App Messages, and other techniques that increase user value.
How Will This Affect Consumers?
Consumers may benefit from greater privacy on the iOS platform. Many advertisements may feel less creepy since they won’t be personalized based on other products or apps people have used. However, advertising personalization is unlikely to meaningfully change on platforms like Facebook or Instagram, where user data linked to email addresses or other identifiers gets used for tracking and personalization.
Some people believe that consumer experiences might get worse. In the case of Apple’s IDFA implementation, users could choose to change or disable their IDFA at any point to opt-out of most ad-related tracking. If advertisers switch to alternate identifiers such as IP addresses, users may no longer have the same level of control over their privacy. There are some early proposals for technology that may help with this, but any changes might be years away.
Many products that consumers are accustomed to getting for free because those companies have generated revenue from advertising will start requiring an up-front payment or a subscription. Some companies will go out of business entirely if they can’t get away from their dependence on advertising revenue.
It’s Not Limited to iOS.
While most of the industry focuses on these impending iOS changes, the broader mobile app and web ecosystem are headed in the same direction when it comes to user tracking and identifiers.
In January 2020, Google announced that support for Third-Party Cookies is being phased-out from the Chrome browser by 2022. This cookie change will impact websites in much the same way as these iOS changes affect mobile applications.
Google is also being pressured by advocacy groups to remove their version of the IDFA on Android devices, called the Android Advertising ID, or AdID.
Overall the advertising ecosystem will change in ways that contribute to a less intrusive and more privacy-friendly advertising experience. However, these changes will negatively affect many businesses that depend on advertising for revenue or user acquisition.
As is typical with these changes, big companies like Apple, Facebook, and Google stand to benefit given their ability to effectively track, personalize, and display ads to users within their closed gardens. In Apple’s case, they will benefit from increased subscription revenue and device sales to privacy-minded buyers.
Closing Predictions on How This Will Affect the Developer Ecosystem
- Many more mobile games, utilities, and other services will switch to requiring a paid subscription to utilize them beyond a short trial period. Those that don’t, or that can’t, will disappear from the app store.
- Apps that have a logical reason to get users to create an account and “log in” will be less affected. Many of these apps will choose to rely on user emails as an identifier for user tracking and ad personalization. That is unless Apple decides to clarify and enforce rules around usage of non-IDFA identifiers such as email, phone number, or IP as a substitute tracking mechanism.
- News and media companies will be some of the more impacted businesses from these changes, given the abundance of free content (even if lower quality) and a reluctance by many consumers to pay for this type of content.
- The importance of closed garden platforms such as Facebook and Google will only increase. Companies that have captive users such as Walmart and Amazon, or growing social platforms like TikTok and Snapchat, will follow in the footsteps of Google and Facebook and will accelerate building out their closed garden advertising stacks.
- Third-party ad networks and demand-side-platforms will switch away from their current focus on retargeting and personalization (which is much more challenging without IDFA), over to contextual advertising. There will also be a renewed focus on affiliate marketing, which leans more on publishers to create an advertising-friendly experience.
- Each app user will become more valuable. As it becomes more costly for advertisers to acquire users through ads, and developers seek to convince users to create accounts or pay for subscriptions, companies will become more focused on user engagement, user experience, and customer retention. Channels like Push Notifications, In-App Messaging, and Email will play a key role in improving user experiences and user retention.
As one reader notes, it’s interesting to contemplate how the impact of this change highlights the powers now vested in major tech platforms to basically manage multi-national economies where they act as legislators, the executive branch, and the judiciary all in one.
Thank you to Alex Austin, Antonio García Martínez, Itai Tsiddon, and Saemin Ahn for reading drafts of this post.
More from Journal
There are many Black creators doing incredible work in Tech. This collection of resources shines a light on some of us:
