Apple CEO Tim Cook delivers a keynote address at the European Union Privacy Conference in the European Parliament in Brussels, Belgium on October 24, 2018.
Yves Herman | Reuters
Snap and Unity Software, which reported fourth-quarter revenue after the clock Thursday, both warned of the impending impact of Apple’s privacy changes introduced for this spring.
To target mobile ads and measure how effective they are, app developers and other industry players today often use Apple’s Advertiser Identifier (IDFA), a unique set of letters and numbers on each Apple device. But once a privacy update is known, app vendors will be forced to ask permission to access a user’s IDFA. A significant portion of users are expected to say no, and this is expected to make ads less effective.
The changes have become a major point of contention for advertising-backed companies like Facebook, which are likely to lose revenue from the change. But Facebook is far from alone.
Unity Software said in its earnings report that the changes to IDFA will have an impact on the way mobile game developers gain new customers and ‘how they optimize lifelong customer value’.
“While difficult to estimate, our guidance assumes that IDFA changes will begin in the spring and will reduce our revenue by approximately $ 30 million, or 3% of revenue, in 2021,” the company wrote.
In the prepared remarks for its Q4 earnings report, Snap chief financial officer Derek Andersen said Apple’s changes would pose a risk of disrupting demand after it was implemented.
“It is not yet clear what the long-term impact of the changes may be on the peak moment of our business, and it may not be clear until a few months or more after the implementation of the changes,” he said.
Apple is currently testing the privacy update in a beta version of iOS 14, which is expected to be released to all users in the “early spring”.
Snap chief operating officer Jeremi Gorman said Snap is working with Apple to prepare for the changes; he is training his advertisers and making long-term investments to use more first-party data for advertising. In addition, the company plans to offer advertisers more opportunities to offer their products and services directly to Snap users via Snapchat.
“The reality is that we admire Apple, and we believe they’re trying to do the right thing for their customers,” she said. “Their focus on protecting privacy is in line with our values and the way we built our business from the beginning.”
She added: “Overall, we feel very well prepared for these changes, but changes to this ecosystem are usually disruptive and the outcome is uncertain.”
Shares of both companies declined Thursday’s trading, with Snap declining more than 10% and Unity down more than 15%.
CNBC’s Salvador Rodriguez contribution made.
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