A new review of the impacts of the Apple privacy updates one year after rollout, conducted by data services firm Lotame, finds that the financial costs to the hardest-hit companies (the social media giants) has been bigger than even some fairly generous projections from a year ago.
The picture is muddied somewhat by most of these companies continuing to experience very strong overall growth in spite of the advertising impact in the Apple ecosystem, but the total cost in 2022 will likely be in the area of $16 billion.
Apple privacy update has strong impact on personalized advertising market
Lotame notes that social media companies continued to experience strong growth in the past year as they took bites out of the remaining territory of traditional and other digital forms of media, and that pandemic conditions introduced some unusual artifacts in terms of patterns of ad spend. But, on the whole, the Apple privacy update (the App Tracking Transparency (ATT) framework) has had the anticipated negative impact on revenues for some tech companies and has even been notably worse for others.
Lotame maintains that the true impact of the Apple privacy update is going to be a hit to future growth, rather than a downturn in current spend, and patterns appear to be pointing to this outcome for the remainder of 2022. This will only be exacerbated in coming years as Google begins to put an end to the tracking cookie and device advertising IDs in its products beginning in 2023, and the possibility of US federal-level digital privacy legislation continues to loom (even as states individually pick up the slack in the interim with their own bills).
As had been anticipated, Facebook took the biggest blow to its revenue due to the Apple privacy update. The company’s Q4 earnings call verified that it anticipates losing about $10 billion due to this development in 2022. Smaller companies with more flexible monetization schemes that are not as reliant on massive networks of personalized advertising, such as Snap (which was able to quickly and successfully pivot in strategy after taking an initial revenue blow when the Apple privacy update first rolled out) and Twitter (which has always been dependent on internal contextual advertising largely not impacted by Apple’s new requirements), actually saw positive revenue developments in 2021.
Impacts to growth and revenue have thus far been a more reliable metric for use in measuring the effect of the Apple privacy update, as opt-out rates among Apple users are difficult to centrally tally and rely on estimates that have been all over the map (generally from about 60% to 80% of all iOS device users, with Lotame suggesting a 65% rate is a realistic expectation). Still, these estimates are far better from dire predictions a year ago, which were seeing 80% opt-out as a conservative estimate and the realistic possibility of well over 90%.
Though it definitely has a noticeable impact on revenue for certain companies, even those that are hard-hit (like Facebook) are nevertheless still experiencing massive growth at the moment. Facebook grew revenues by 37% in 2021, as did Twitter; Snap was up by 64% on the year despite stumbling in the middle. Facebook is expected to eat 81% of the projected loss for 2022 as it continues to pivot as Snap did, albeit necessarily much more slowly due to its massive entrenched advertising network. Lotame is anticipating a $2.2 billion hit for YouTube, $546 million for Snap and $323 million for Twitter on the year due to the Apple privacy update.
Companies continue to adapt to ATT framework changes
The Apple privacy update shook up the advertising world by giving iOS device users granular control over whether or not each app can access the Identifier for Advertisers (IDFA), the unique number assigned to each device and used by personalized ad tracking networks. App publishers are not allowed to discriminate in providing service to device users that opt out of tracking, essentially putting those users beyond the reach of targeted advertising on the platform. As expected, the majority of Apple users appear to be opting out of being tracked by the majority of their apps.
Google and Apple are moving forward with an assortment of plans for IP addresses that could further shake up the digital marketing world. Apple has already introduced this as a premium paid feature for iCloud; iCloud Private Relay keeps IP addresses private for all activity in the Safari browser, and as of iOS 14.5 they are also hidden from Google’s Safe Browsing Service. There are whispers of Private Relay being expanded to other elements of the Apple ecosystem in the future; in the meantime, Google has also announced its own plans to stop logging IP addresses in the widely-used Google Analytics and potentially add similar features to Chrome at some point in the future.