On April 26, 2021, Apple announced its launch of the new iOS update 14.5, which includes the ability to unlock your screen with the smartwatch, new Siri customization options, and an “App Tracking Transparency” (ATT) update. Apple has been transparent about this new ATT update since June of last year since it will likely have a significant impact on app developers and potentially businesses who use online ads as well.
According to Apple: “App Tracking Transparency (ATT) requires apps to get the user’s permission before tracking their data across apps or websites owned by other companies for advertising or sharing their data with data brokers. Apps can prompt users for permission, and in Settings, users will be able to see which apps have requested permission to track so they can make changes to their choice at any time.”
What Does This Mean?
While users have always had the freedom to opt-out of tracking in their settings, the default has previously always been to opt-in. Now the script is being flipped. It’s a fair assumption that most people when prompted directly will opt-out of being tracked, whereas before they may not have thought to go in and disable this function.
However, apps are allowed to add whatever explanation they’d like in the pre-prompt to try and convince users to allow tracking, which would create informed consent. Some users have already felt alarmed by Facebook and Instagram’s added tag that says “Help keep Facebook (or Instagram) free of charge”:
Image source: SocialMediaToday
This wording is rubbing some users the wrong way given Facebook’s long-standing tag line that Facebook was “free and always will be” that was quietly removed from the homepage in 2019.
Mark Zuckerberg’s statement that “There will always be a version of Facebook that is free” in the last several years implies that there may be other versions in the future that are not. And if Facebook is “free”, you might have to pay in another way, such as allowing data tracking.
Facebook’s business model is heavily based on ads. And while Facebook can still use ads and gather data from within their apps, they are not allowed to share it with third parties unless users consent. This is what allows them to give tracking data to businesses using personalized advertising—and that’s a huge part of their revenue.
When talk of ATT started to circulate last year, there was a very strong reaction to it, so much so that Facebook actually launched a public campaign against it, including full-page newspaper ads and an entire website called “Speak Up for Small Business”. Facebook proposes that this change will cause small businesses who rely on personalized ads to take a huge hit financially as their ad dollars will not go as far as they do now to reach their target audience.
So, what does all this actually mean for small businesses?
Prepare for Changes
Given that a large chunk of iOS users may now opt-out of tracking where they didn’t before, you may see the effects if you use paid advertising, particularly on Facebook and Instagram. You can get a sense now of how much of your current customer base uses iOS by checking your analytics.
You can also exclude iOS devices in your marketing. This obviously isn’t a long-term solution, but in the short term, it can give you a better idea of what you can expect over time as the update takes effect as well as give you time to run some tests.
In the long term, you will want to focus less on conversions and more on generating leads and creating brand awareness—which has always been a sound strategy for a small business.
Rely Less on Tracking
It’s important to consider how this change may impact the effectiveness of the Facebook tracking pixel. If Facebook is not able to track user behavior because users are not giving permission, overall the pixel’s reporting of conversions is going to be inaccurate.
Targeted and personalized ads will be impacted as well. This means that your current ad dollars being invested into Facebook and Instagram may become less effective.
But targeted advertising may not actually be all it’s cracked up to be. According to some studies, revenue from targeted advertising doesn’t usually reach the actual creators of the content—it mostly goes to data brokers, such as Facebook and Google.
It may only bring in as much as 4% more revenue, or $.00008 per ad—which is still something, but overall it’s not a huge increase in profit.
Not to mention, the focus on targeted advertising as the primary method to reach an audience actually decreases the value of ads that aren’t targeting users, and it also diverts attention and funding away from discovering other advertising methods that may not involve invading individual privacy.
Consider this change one that is not inherently bad in the long-term—though it may have negative effects in the here and now. Imagine the possibility of a system where small businesses had a level playing field with large corporations and didn’t need to fight with ad dollars just to keep up.
Don’t Buy into the Drama
There are two sides to any story, and this has never been more true than when two seemingly omnipotent tech companies are feuding against one another in the name of small businesses and individual privacy.
Yes, these changes will absolutely affect small businesses. But more than that, it will affect large corporations who make up a huge bulk of Facebook’s revenue. If these corporations decide that pouring millions of dollars into advertising with Facebook isn’t their best bet anymore, they may take their money elsewhere—and this is likely the core fear that the platform is speaking from right now.
This isn’t to say that Facebook isn’t genuinely concerned about the effect that this change will have on small businesses. But change isn’t always a bad thing. For years, small businesses have been dealing with the tribulations and frustrations of trying to stretch a small ad budget to be effective on a massive platform that sees their dollars as mostly insignificant (because they are, in the scheme of things).
But in the past, small businesses didn’t have many other choices to reach their audience other than to throw what money they had at Facebook and hope for the best. It’s possible that Apple putting a bit of a squeeze on Facebook may make Facebook value their smaller contributors more. It’s also a great time to consider other plans for how to reach your audience rather than relying on personalized ads.
After all, can you blame individuals for wanting to opt-out of tracking? (Let’s be honest, you probably opt-out, too!)
On the other hand, though, there a business strategy behind Apple’s actions as well. One of Facebook’s arguments against the opt-in model for tracking is that it may cause businesses to begin charging subscription fees or creating paywalls since they can’t make the same revenue from ads.
If such a thing were to happen, Apple would get a cut of those fees, whereas they don’t get any cut of Facebook’s ad revenue. Apple is also releasing new in-house tools for developers to use to assist with tracking that doesn’t identify specific users. These tools might tell you things like how many times an app was downloaded after a certain ad was seen, or how many times users clicked on an ad for a product within an app.
Every business has to operate under a model that’s going to produce a profit, so it’s difficult to demonize Apple for choosing a direction that is both profitable and protective of privacy at the same time.
Although Facebook and Apple may not seem like they are in direct competition since they’re in different industries with different revenue models, Zuckerberg said in Facebook’s January earnings call that Apple was actually one of his company’s “biggest competitors”.
He asserts that “Apple has every incentive to use their dominant platform position to interfere with how our apps and other apps work, which they regularly do to preference their own. This impacts the growth of millions of businesses around the world, including with the upcoming iOS 14 changes”.
It’s important to be critical of the statements made on both sides. Facebook and Apple both have invested financial interests in the outcome of this update, so much so that Apple has been preparing an antitrust lawsuit against Apple.
As individuals and business owners, it’s important to consider the balance between individual privacy and successful business practices. If you’re concerned about how Apple’s new iOS update is going to affect your business, we recommend checking out the sources provided from Facebook and Apple directly.
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