Developers claim that Apple's privacy-first features are 'atomic bomb' for revenue

In iOS 14.5 users will be able to opt out of ad tracking when installing a new app. This renders the Identifier for advertisers (IDFA) useless, showing a series of zeroes for any user who opts out of tracking.

Large businesses have bemoaned the update, stating significant revenue losses and damages to advertising as a whole. Facebook, in particular, has been very vocal about how this may affect the company's ability to advertise for small businesses.

Bloomberg talked to Adam Jaffe, the CEO of Tenko Games, to understand how this might affect app developers. Tenko Games is an app development studio responsible for games like "Underworld Football Manager."

Jaffe says he expects to lose roughly 20% of income from iPhone users after the update goes live. The company's 2020 revenue was $3.5 million, and its ability to advertise to specific users aided its growth.

"It's like an atomic bomb," said the Barcelona-based former professional soccer player who's also a consultant for other game studios. "People are going to have to reinvent how they do the job of marketing — well, not reinvent but go back to where it was 10 years ago."

Advertising companies build complex profiles using the massive amounts of data they collect about customers. These profiles are then targeted by companies like Tenko Games to show products to people who may spend money on them.

If a majority of iPhone users opt-out of tracking, then those profiles become weaker, and advertising becomes more difficult. There is some advantage to be gained by this change, however, since the data won't exist for big companies either. Apple's change may level the advertising playing field by removing the power from companies who have more money for targeted advertising.

Apple's argument for the change is simple. Apple says that "users should have the choice over the data that is being collected about them and how it is used." The privacy-first argument rings true for users, but companies still fear what comes next.

The competitive landscape will become more brutal as companies fall victim to the changes. Rather than relying on advertising metrics like IDFA, Tenko Games might have to use data gathered internally or hike Android advertising to replace lost revenue.

Jaffe's soccer game sees all of its revenue from about 5% of its users. These "whales," as the industry calls them, are likely found via targeted advertising metrics. The IDFA tracker gives developers information like what apps people use and who spends money on them — which is critical when identifying whales to target.

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