NEW YORK, NEW YORK – SEPTEMBER 20: Apple CEO Tim Cook greets customers at the grand reopening of Apple’s flagship store, Apple Fifth Avenue, on September 20, 2019 in New York City.
Taylor Hill | WireImage | fake images
The world of digital advertising is struggling to prepare for a seismic shift when Apple updates its iPhone software in the coming weeks.
The measure, called App Tracking Transparency, or ATT, will force app makers to ask for permission before they can collect a unique identifier on each iOS device called an Identifier for Advertisers, or IDFA. A significant proportion of users are expected to say no. Today, developers and advertisers use 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 an additional benefit for Apple: greater power over its App Store, giving Apple more control over the types of applications that become popular and earn millions through the store.
In particular, it could make it difficult for app makers to entice consumers to download their apps through in-app ads. That could help Apple steer consumers toward the apps it chooses to feature on the App Store for its own business purposes. For example, Apple could highlight more games that are charged through subscriptions, where Apple gets a continuous cut, and fewer casual social games that are heavily monetized through in-app purchases, which could detract from the value of the game. overall iOS gaming experience and hurt Apple’s brand.
The move could also boost Apple’s own search ads, which are app download ads that appear directly within the App Store.
Apple’s app store and advertising business are reported as part of its services business, which the company has singled out to investors as an engine of growth. It generated revenue of $ 53.8 billion in fiscal 2020, up 16% from the prior year.
“Apple has been able to defend the moral ground, I think, stating that they focus on user privacy. But in reality, they really handed app discovery and commercialization to Facebook and Google. What I see them doing is trying to recover that control, “said Brian Bowman, CEO of Consumer Acquisition, a digital advertising company that focuses on user acquisition.
When contacted for comment, Apple reiterated its commitment to privacy.
“We believe that privacy is a basic human right and that users should be transparent and able to choose how their data is collected and used. We have invested in privacy-preserving technologies for decades, with Intelligent Tracking Prevention in Safari, Privacy Labels in the Store app, Sign in with Apple, and App Tracking Transparency. Our privacy features apply to all developers, including Apple. But users will not see Apple App Tracking Transparency prompts because we don’t track the users “.
How App Install Ads Work
For years, many of the apps that have topped Apple’s App Store charts have been supercharged by a marketing strategy designed to target the users who are most likely to spend.
Companies like Facebook, Google, and TikTok sell app install ads. They usually appear in other applications as a pop-up window or an item within a font. When users click on the ad, they go to a page in the App Store to download the advertised app.
App install ads are a critical part of the user acquisition strategy for many businesses, especially e-commerce businesses and casual games that rely on getting a small fraction of users to purchase many in-game add-ons. These users are sometimes referred to as “whales”. An estimate from AppsFlyer, which makes adware for app makers, says app makers will spend $ 96.5 billion on app install ads in 2021, or about a third of total mobile ad spend.
That is because they are effective. Sensor Tower, an analytics firm that monitors app stores, published a study Thursday that found that referrals from other apps drove 20% of new app installs on the App Store in 2020. The single largest source was direct searches on the App Store, which accounted for 59% of installs.
A mockup of the pop-up window that iPhone users will see before using an app that tracks their data. This image was provided by Apple.
App install ads are often sold by price per install, ranging from pennies to tens of dollars. Typically, ad buyers will estimate how much a customer in a given demographic could spend during their time using the app and will make a simple mathematical judgment. If the price per install is less than the estimated lifetime value of the people those ads are targeting, then the app maker buys as many ads as it can.
The ATT change and other Apple privacy settings threaten this model by drastically reducing the amount of information marketers have about the effectiveness of their ads. Without that information, application marketers cannot know if they are getting the right people to install their applications.
“When you look at companies that are investing $ 6 [million] at $ 20 million a month, every month for 18 months to recoup the investment, all of that becomes opaque very, very quickly, when Apple flips that switch, “Bowman said.
Casual gaming apps, which often appear on Apple’s top-grossing charts, are more likely to be damaged. Games are a big part of Apple’s App Store business, accounting for 65.8% of spend on the platform, according to an estimate from Sensor Tower.
For games, referrals are the top source of downloads, generating 38% of first-time installs in 2020, more than people searching the App Store directly, according to Sensor Tower.
“The primary growth strategy for most, if not all, mobile game companies is paid ads. Actually, there are no game companies that don’t use them,” said Eric Seufert, author of the Mobile Dev Memo, which has experience in user acquisition for gaming companies.
Unity, a company that makes games and advertising software for small developers, warned in February that the IDFA change could change “the way mobile game developers acquire customers and optimize customer lifetime value.”
Andre Kempe of Admiral Media, a marketing company focused on mobile app publishers, believes that Apple’s change could force game creators to change the way their games work. Rather than relying on a few large spenders, they may have to target a larger number of people to spend smaller amounts.
“Once they figure it out, okay, I need to make money from this, then some product manager would say, okay, we need to put a checkout screen somewhere on the first level, which they haven’t seen before, so that the experience user change a bit, “Kempe said.
Yes, Apple sells ads.
There are more than 1.8 million apps on the App Store and App marketers say apps can’t rely on waiting for people to discover them in the App Store or waiting for Apple to introduce them.
“It’s the tyranny of over-choice, because you go in there and you can access and download anything for the most part on the free side, from a gaming perspective,” said TS Kelly, Carat’s chief analyst. , a media agency.
Apple prefers to promote sleek and beautiful apps within the App Store that fit its brand image, not casual games that are adept at advertising.
“If Apple damages advertising and makes it much less efficient, then developers become more dependent on Apple for exposure,” Seufert said.
But there is a way to pay for a better App Store placement: search ads.
Though it’s small compared to Apple’s App Store revenue, which reached an estimated $ 21.7 billion last year according to Sensor Tower, its ad business is growing.
In January, Apple’s CFO Luca Maestri said the company hit a record in terms of advertising revenue. The company has not been more specific. The Wall Street Journal reported in 2018 that it generated about $ 1 billion in revenue per year.
Apple’s search ads have an advantage over other ad networks because Apple doesn’t need to track across sites to identify people who can buy; With search ads, the user has already signaled an intention to download a particular type of application.
As app install ads become less effective, more app makers may be forced to purchase search ads from Apple.
“Many advertisers will not accept the fact that they are a little blind with iOS and Facebook,” Kempe said, and instead will come to rely on the more detailed information that Apple can give them.
Apple highlighted this ad business in its latest earnings call, while once again emphasizing privacy.
“The search-based advertising business is doing well, there’s a lot of search intent,” Apple CEO Tim Cook said in a call with analysts in January. “We do it in a very private way, respecting excellent privacy policies, etc.”