iOS 14 privacy feature delay will help advertisers cope with revenue hit

Credit: Apple

Investment bank Cowen sees Apple's decision to delay new iOS 14 privacy features as a net positive both for consumers and the relationship between Apple and developers.

One specific privacy feature coming in Apple's next update requires apps to obtain permission from users to track them across other apps and websites. Apple has since said the feature will go live in early 2021.

In a note to investors seen by AppleInsider, Cowen analyst Krish Sankar said that the move is a "slight positive from a developer relationship standpoint." That's because, although a boon to privacy and consumers, the change is likely to have an effect on developer revenue and possibly overall App Store earnings.

The feature concerns the Identifier for Advertisers (IDFA) tracking tag, which allows apps to collect aggregate data without personally identifiable user information. Allowing users the ability to opt-in to IDFA tracking gives them much more control over their data on iOS.

Apple's decision to require permission to use IDFA has been controversial among advertisers. Facebook, for example, has warned businesses that they could see up to a 50% drop in Audience Network revenue on iOS devices.

"We believe Apple's decision to delay the new IDFA-related feature at the very least helps to maintain the status quo in developer relations but it could also have an unclear impact toApp Store revenues near term," Sankar wrote.

The analyst notes that, without IDFA, advertisers could find it much more difficult to market or sell products to end users. Additionally, it will become harder to serve targeted ads — which typically garner higher prices.

Although the change is coming despite advertiser protestations, Cowen notes that the three month period between WWDC 2020 and the release of iOS 14 could have been too short a period for developers to update, test, and formulate new advertising technology algorithms.

For example, without IDFA tracking, businesses dependent on targeted advertising will likely need alternative statistical methods or models to match user profiles with products, services, and ads.

"Apple continues to advocate and implement user Privacy policies that we believe aim to enhance the user experience of the iOS platform longer term. While it is unclear if there is any near-term impact to App Store revenues, the decision to balance developer concerns and feedback is also a welcome move to ensure the iOS platform remains attractive for developers over the medium/longer term," Sankar wrote.

Cowen is maintaining its $133 AAPL price target, which is based on a 25x multiple to Apple's core businesses and a 41x multiple on Services.

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11 Comments

MplsP

said about 3 years ago

I have little sympathy for advertisers who covertly spy and steal user information, but the practical matter is the current structure of the internet is built around this model. As long as the 'new advertising technology algorithms' don't involve circumventing privacy I'm ok giving them a little more time. Like a week or two.

CloudTalkin

said about 3 years ago

For example, without IDFA tracking, businesses dependent on targeted advertising will likely need alternative statistical methods or models to match user profiles with products, services, and ads.
The only thing delayed implementation does is give advertisers more time to perfect their device fingerprinting algorithms. Lovejoy wrote a depressing opinion piece over at 9to5.
https://9to5mac.com/2020/09/04/ad-industry-tracking/#disqus_thread

The TLDR version is Facebook's caterwauling might just be theatrics designed to lull the concerned into a false sense of security about iOS 14's app permissions. Reminds me of the government's "woe is me" tiny violin playing regarding device unlocking. Me thinks they doth protest too f'n much.

Rayz2016

said about 3 years ago

CloudTalkin said:

For example, without IDFA tracking, businesses dependent on targeted advertising will likely need alternative statistical methods or models to match user profiles with products, services, and ads.

The only thing delayed implementation does is give advertisers more time to perfect their device fingerprinting algorithms. Lovejoy wrote a depressing opinion piece over at 9to5. https://9to5mac.com/2020/09/04/ad-industry-tracking/#disqus_thread

The TLDR version is Facebook's caterwauling might just be theatrics designed to lull the concerned into a false sense of security about iOS 14's app permissions. Reminds me of the government's "woe is me" tiny violin playing regarding device unlocking. Me thinks they doth protest too f'n much.

That's interesting. A couple of people followed up by saying when they tried the same tests as Lovejoy, the test site couldn't uniquely identify them. According to this white paper, Apple is already working on defeating device fingerprinting.

https://www.apple.com/safari/docs/Safari_White_Paper_Nov_2019.pdf

Fingerprinting defense
In addition to blocking cookie-based tracking, Safari works to prevent advertisers and websites from using the unique combination of characteristics of a device to create a “fingerprint” to track the user online. Some of these characteristics include the device and browser configuration and the fonts and plug-ins that have been installed. To combat fingerprinting, Safari presents a simplified version of the system configuration to trackers so more devices look identical, making it harder to single one out. And unlike some other browsers, Safari doesn’t add any custom tracking headers or unique identifiers to web requests. On other browsers, these headers can include things like location, sign-in status, account information, features enabled, and other data that can be used for cross-site tracking.

But of course, this will only work if you're using Safari.

libertyforall

said about 3 years ago

This is shit. Only thing I was looking forward to in iOS 14.

CloudTalkin

said about 3 years ago

Rayz2016 said:

CloudTalkin said:

For example, without IDFA tracking, businesses dependent on targeted advertising will likely need alternative statistical methods or models to match user profiles with products, services, and ads.

The only thing delayed implementation does is give advertisers more time to perfect their device fingerprinting algorithms. Lovejoy wrote a depressing opinion piece over at 9to5.  https://9to5mac.com/2020/09/04/ad-industry-tracking/#disqus_thread

The TLDR version is Facebook's caterwauling might just be theatrics designed to lull the concerned into a false sense of security about iOS 14's app permissions. Reminds me of the government's "woe is me" tiny violin playing regarding device unlocking. Me thinks they doth protest too f'n much.

That's interesting. A couple of people followed up by saying when they tried the same tests as Lovejoy, the test site couldn't uniquely identify them. According to this white paper, Apple is already working on defeating device fingerprinting.

https://www.apple.com/safari/docs/Safari_White_Paper_Nov_2019.pdf

Fingerprinting defense
In addition to blocking cookie-based tracking, Safari works to prevent advertisers and websites from using the unique combination of characteristics of a device to create a “fingerprint” to track the user online. Some of these characteristics include the device and browser configuration and the fonts and plug-ins that have been installed. To combat fingerprinting, Safari presents a simplified version of the system configuration to trackers so more devices look identical, making it harder to single one out. And unlike some other browsers, Safari doesn’t add any custom tracking headers or unique identifiers to web requests. On other browsers, these headers can include things like location, sign-in status, account information, features enabled, and other data that can be used for cross-site tracking.

But of course, this will only work if you're using Safari.

I basically ignored the individual anecdotes for Lovejoy and the comments. Personal anecdotes are fairly useless as purveyors of factual information imo. Ben said he could be traced. Someone else said they couldn't.  ¯\_(ツ)_/¯ The important thing to me is the actual info about the processes. Apple's countermeasures are a good thing, an important thing, but also a thing that is constantly being counterattacked. More importantly, you note, it only works if the user accesses the web via Safari. The additional time allotted before implementation in iOS 14 simply allows advertisers to 1. poke at Safari and 2. further mitigate the effectiveness of the privacy feature once it's live.

I wonder if AI is going to avail itself of the fingerprinting tech? This is an ad supported site (like most of the internet sites) that probably won't fare too well if the privacy feature goes live and they have no way around it.