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

The digital advertising world is preparing for a seismic change when Apple updates its iPhone software in the coming weeks.

The move, called App Tracking Transparency, or ATT, will force app makers to ask permission before they can collect a unique identification on each iOS device, an ID for advertisers, or IDFA. A significant proportion of users are expected to say no. Today, developers and advertisers use the IDFA to target mobile ads and measure how effective they are.

Apple has consistently said that the change to its platform, which was announced in June, is about privacy.

However, professionals with digital advertising say that there may be an added benefit for Apple: increased power over its App Store, which gives Apple more control over the types of apps that get popular and gross millions through the store.

This can make it harder for app makers in particular to entice consumers to download their apps through in-app ads. This could help Apple guide consumers to the apps they choose to highlight in the App Store for its own business purposes. For example, Apple may emphasize more games paid for by subscriptions, where Apple is constantly cutting, and less comfortable social games that make a lot of money through in-app purchases, which can hurt the overall iOS gaming experience and hurt Apple’s brand name.

The move could also promote Apple’s own search ads, which are ads for downloading applications that appear directly in the App Store.

Apple’s App Store and advertising industry are both reported as part of its service business, which the company has highlighted for investors as a growth engine. It generated fiscal 2020 revenue of $ 53.8 billion, up 16% from the previous year.

“I think Apple was able to stick out the moral high ground and claim that they were set on user privacy. But in reality, they really handed over the discovery of the app to Facebook and Google. What I see is to try. To control get back, ”said Brian Bowman, CEO of Consumer Acquisition, a digital advertising firm that focuses on acquiring users.

When asked for comment, Apple reiterates its commitment to privacy.

“We believe that privacy is a basic human right and that users should have transparency and choice about how their data is collected and used. We have been investing in privacy protection technologies for decades, with Intelligent Tracking Prevention in Safari, Privacy Labels on the App Store, “Sign in with Apple and Transparency Tracking Applications. Our privacy features apply to all developers – including Apple. But users do not see the instructions for Apple Transparency Tracking information because we do not detect users.”

Many of the apps that have risen to the top of Apple’s App Store maps have been uploaded years ago by a marketing strategy designed to target users who are most likely to spend.

Companies like Facebook, Google and TikTok sell app ads. They usually appear in other programs as a pop-up or as an item in 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 an important part of the user acquisition strategy for many companies, especially e-commerce businesses and informal games that rely on a small fraction of users to purchase many add-ons in the game. These users are sometimes known as “whales”. According to an estimate by AppsFlyer, which makes advertising software for app makers, in 2021, app makers will spend $ 96.5 billion on ad installation ads, or about a third of total mobile ad spend.

This is because they are effective. Sensor Tower, an analytics firm that monitors app stores, published a study on Thursday that found that references from other apps in 2020 powered 20% of the new app installations in the App Store. The only major source was direct searches in the App Store, which accounted for 59% of installations.

App installation ads are often sold at cost per installation, ranging from pennies to ten dollars. The ad buyers will usually estimate how much a customer in a given demographic spends during the time using the app, and make a simple mathematical judgment. If the cost per installation is less than the estimated lifetime of the people the ads are targeting, the app maker buys as much of the ads as it can afford.

The ATT change and other Apple privacy adjustments threaten this model by drastically reducing the amount of information marketers have about how effective their ads are. Without the information, app marketers may not know if they are getting the right people to install their apps.

‘If you look at the companies that invest $ 6 [million] “Up to $ 20 million a month, every month for 18 months to get a refund, all of that becomes very, very quickly opaque when Apple turns the switch,” Bowman said.

Casual game applications, which often appear on Apple’s top growth tables, are likely to be hurt. Games make up a large portion of Apple’s App Store business, according to 65.8% of spending on the platform, according to a Sensor Tower estimate.

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

“The primary growth strategy for most, if not all, mobile gambling companies is paid advertising. There are not really gambling companies that do not use it,” says Eric Seufert, author of Mobile Dev Memo, with a background. in user acquisition for gambling companies.

Unity, a company that builds games and advertising software for small developers to build on, warned in February that the IDFA change could change the “way mobile game developers acquire customers and how they can increase customer value” optimize. “

Andre Kempe of Admiral Media, a marketing firm focused on mobile application publishers, believes that Apple’s change could force game makers to change the way their games work. Instead of relying on a few large spenders, they may need to target larger numbers of people to spend smaller amounts.

‘Once they realize, okay, I have to make money with this, then some product manager will say: okay, we need to place a payment screen somewhere on the first level, which you have not seen before, so that the user experience changes a a little, ‘said Kempe.

There are more than 1.8 million apps in the App Store, and application marketers say apps can’t rely on people discovering it in the App Store or waiting for Apple to see it.

“It’s the tyranny of choice because you go in there, and you can access and download for most of the free – to – play side, from a game perspective,” said TS Kelly, head of analysis at Carat. , a media agency.

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

“If Apple harms advertising and makes it much less effective, developers become more dependent on Apple for exposure,” Seufert said.

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

Although small compared to Apple’s App Store revenue, which, according to Sensor Tower, reached an estimated $ 21.7 billion last year, the advertising industry is growing.

In January, Apple chief financial officer Luca Maestri said the company had achieved a record in advertising revenue. The company was no longer specific. The Wall Street Journal reported in 2018 that it generated about $ 1 billion in revenue per year.

Apple’s search ads have an edge over other ad networks because Apple does not have to do cross-tracking to identify people who are likely to buy. With search ads, the user has already indicated that he wants to download a specific type of app.

As app installation ads become less effective, more app makers may move to buy Apple’s search ads.

“Many advertisers will not accept the fact that they are a kind of blindness on iOS and Facebook,” Kempe said, and would rather rely on the more detailed information Apple can give them.

Apple eliminated this advertising business in its latest earnings call, while once again emphasizing privacy.

“The search advertising business is doing well, there’s a lot of intent with search,” Apple CEO Tim Cook said in a call to analysts in January. “We do it in a very private way, taking into account major privacy policies, and so on.”