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A step back: IDFA’s impact on the advertising ecosystem

30-second summary:

  • To make apps for free, there is a reliance on a digital currency – that is, sharing your own data in exchange for valuable services rendered in the apps you love.
  • Apple’s proposed change to the IDFA (delayed until 2021) will likely have a staggering impact on the entire advertising ecosystem and the online marketing world.
  • Ultimately, all iPhone users will be forced to make a critical choice sooner or later to select “Allow Tracking” to keep all their favorite apps for free — like social media, gaming, news, entertainment, etc. — that is personalized for them with relevant ads and content.
  • The other is “Ask App Not To Track,” which means there may be a need for paying a fee or getting hit with irrelevant ads and poor generic in-app user experiences.

Apple’s upcoming iOS 14 release offers a variety of new features and enhancements, including a home screen redesign with widgets, a translate app and clips. Yet there is one change that needs more attention. It’s called IDFA (Identifier for Advertisers) – and it will likely have a staggering impact on the online marketing world.

IDFA essentially works like a cookie except it lives within a mobile app. The IDFA makes it easier for advertisers to report actions of users, for instance when there is an app installation or click on an icon.

While Apple has not eliminated this important identifier, the company has made it less useful because users will need to go through an opt-in process, which will likely mean a significant reduction in IDFA.

The impact of this change in tracking and measurement is, in a word, monumental. So much so that when Facebook tested mobile marketing features in compliance with the new IOS14 restrictions, Apple actually backpedaled and agreed to shift the launch of this change until 2021.

Apple’s move is really a classic example of the old quip: “Hell is paved with good intentions.” The fact is that there will be serious unintended consequences for both marketers and consumers.

Let’s review how:

Advertising time warp

In the early days of the web, advertising was focused on posting general banner ads that often had little relevance to users beyond some contextual targeting. This limited targeting option strategy gained a reputation known  as the “spray and pray” approach to digital advertising.

But with the emergence of cookies and the evolution of advanced data systems, the ads became more relevant and personalized. The ads were now more beneficial for users.

Companies like Facebook and Google turned into juggernauts by developing a sophisticated infrastructure for delivering highly relevant ads to customers and prospects.

With the crippling of IDFA, this progress will be reversed.  We’ll be turning back to a past era where ads were more like spam.

Shrinkage of the app market

It really is amazing that – for free – you can get virtually unlimited storage for your photos on apps like Instagram and Facebook. Or that you can upload as many videos as you want on YouTube.

But of course, there is still a cost for this. Hiring engineers is not cheap and building data centers is not either.

To make apps for free, there is a reliance on a digital currency – that is, your own data. You exchange your attention for valuable services rendered in the apps you love.

For the most part, billions of users think this is a pretty good deal. Even with the periodic data breaches and privacy violations, there has still been continued user growth with apps. Consumers like these things!

However, without an ad-based model to support all this, there will inevitably be more restrictions on usage.

Expect to see the proliferation of paywalls and subscription services. And if these emerging business models do not generate enough revenues, then there will be less innovation with app development.

That’s a big deal that affects everyone.

Big tech

Even though Apple’s changes will weigh on big tech companies, they will find ways to adapt.  It certainly helps that they have huge troves of data and massive amounts of cash.

These companies may also create their own systems to help with tracking. Indeed, the biggest among them — Epic Games, makers of global gaming hit Fortnite — has begun pushing back on Google and Apple’s grip on the app ecosystem by shifting to direct monetization.

But there is another issue:  smaller companies will be at a disadvantage. Let’s face it, they already have challenges with competing against big tech.

Apple’s new policy on IDFA could easily lead to more concentration of power in the digital world. This is counter to everything we know about the benefits of truly open markets.

Artificial intelligence

The advances with this technology have been staggering. With systems like Siri and Alexa, AI has become a normal part of everyday life.

But a key to the progress has been the availability of large amounts of data, which train complex and sophisticated models. Unfortunately, with more limitations, the innovations could easily be stifled, and lead to less-fulfilling in-app experiences.

Conclusion

Apple should be lauded for its focus on privacy. No question about that. Yet with its policy on IDFAs, the company is taking an extreme approach that will lead to vast unintended consequences.

There needs to be a balancing act when it comes to the use of personal information. Otherwise, we risk devastating one of the greatest innovations in consumer technology in the last 20 years.

Ultimately, all iPhone users will be forced to make a critical choice sooner or later. One is to select “Allow Tracking” to keep all their favorite apps for free — like social media, gaming, news, entertainment, etc. — that is personalized for them with relevant ads and content.

The other is “Ask App Not To Track,” which means there may be a need for paying a fee or getting hit with irrelevant ads and poor generic in-app user experiences.

For all the iPhone users, please choose wisely when you upgrade to iOS14. Your choice to opt-in or not will have significant ramifications about everything you love about the mobile apps on your phone.

Lomit Patel is the Vice President of Growth at IMVU. Prior to IMVU, Lomit managed growth at early-stage startups including Roku (IPO), TrustedID (acquired by Equifax), Texture (acquired. by Apple) and EarthLink. Lomit is a public speaker, author, advisor, and recognized as a Mobile Hero by Liftoff. Lomit’s new book Lean AI, which is part of Eric Ries’ best-selling “The Lean Startup” series, is now available at Amazon.

The post A step back: IDFA’s impact on the advertising ecosystem appeared first on ClickZ.

Reblogged 1 month ago from www.clickz.com

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