Facebook Says Apple's New iPhone Update Will Disrupt Online Advertising--Update
August 26 2020 - 2:36PM
Dow Jones News
By Jeff Horwitz and Patience Haggin
Facebook Inc. says privacy changes that Apple Inc. has made to
its newest operating system will cripple the social-media giant's
ability to serve targeted ads to iPhone users while they use
outside apps.
The announcement sharpens the clash between the two tech giants,
with Apple standing for user privacy while Facebook defends the
free flow of data that has long underpinned digital marketing.
Facebook on Wednesday released a note to app developers, saying
Apple's changes will affect its Audience Network business. That
business connects users' Facebook identities with their
off-platform activities, enabling the company to serve ads on
outside apps -- and to enrich its own data set with information
collected elsewhere, allowing Facebook to refine its behavioral
targeting.
The changes go into effect with Apple's new operating system for
iPhone, called iOS14, which was released in beta form to developers
in June. Under Apple's new rule, Facebook and other firms that
facilitate online advertising will no longer be allowed to gather
Apple's identifier for advertisers, or IDFA, without user
permission. This 32-character string of letters and numbers is the
user's principal pseudonym in the 'anonymized' files kept by the
digital-ad and data-broker industries. Companies large and small
use it to match up data sets about where users go, what they have
bought and what apps they use.
Apple didn't immediately respond to a request for comment.
Facebook doesn't disclose the size of the Audience Network
business, though it is believed to represent a slice of Facebook's
nearly $70 billion digital-ad empire. Before the Covid-19 pandemic
struck, ad-tech consulting firm Jounce Media predicted Facebook
Audience Network would bring in $3.4 billion in 2020. Yet the
company expects the impact from Apple's new consent requirements
will be significant enough that the company acknowledged the IDFA
changes on its July 30 earnings call.
Companies that use Facebook's ad technology to sell ads in their
apps, from game makers to news publishers, could be impacted by
Apple's change.
Facebook said in preliminary testing it has seen a 50% drop in
publisher revenue when personalization was removed from
advertising.
Apple, which produces devices sold world-wide, has criticized
the data collection operation that underlies Facebook's massive
advertising business. Facebook, meanwhile, has faulted Apple for
the exclusionary nature of its platform and for operating data
centers in countries without robust protections for users.
Apple Chief Executive Tim Cook has made privacy one of the
company's priorities in recent years, running advertisements based
on its intent to protect user data and refusing to comply with some
law-enforcement requests to unlock iPhones for high-profile
investigations.
Mr. Cook has even sought to turn a principle advocated by his
predecessor, Steve Jobs -- that "our customers are not our product"
-- into a business strategy. The company has gradually aimed to
increase customer awareness of the value of privacy with features
such as a sign-in option on apps that conceals personal information
and a browser update that reveals how sites track users.
"Our view of privacy started from our values, then we crafted a
business plan from that," Mr. Cook said during a Fortune conference
in 2018.
Apple critics have argued the company is restricting access to
its platform to restrict competition on its platform in
self-serving fashions, however. Facebook earlier this month joined
those protesting Apple's 30% cut from transactions within apps,
saying in a product release that it asked for an exemption but was
refused. Facebook at the time presented the issue as a benefit for
small businesses struggling during the pandemic.
In preparation for the new iPhone operating system, the
digital-ad industry is bracing for many users to select the option
"Ask App Not to Track." That will remove a key linkage that
Facebook and Alphabet Inc.-owned Google use to support their
massive digital advertising businesses -- not to mention the host
of small companies that are even more reliant on it. In a survey by
Tap Research Inc., 85% of respondents said that if they saw this
message in their favorite app, they'd select "Ask App Not to
Track."
Despite its efforts to adapt to the coming changes, Facebook
said Wednesday, they "may render Audience Network so ineffective on
iOS14 that it may not make sense to offer it on iOS14 in the
future."
Facebook said the changes would likely result in reduced
earnings for developers "at an already difficult time for
businesses," adding that it considers the situation to still be
murky because of an absence of guidance from Apple.
"If Facebook loses the ability to gather user-level data from
iOS apps, that delivers a serious blow to its user-profile
enrichment process," said digital-ad consultant Ratko Vidakovic.
"If advertising effectiveness suffers, it will limit the scale of
ad spend on Facebook in the future, consequently limiting
Facebook's growth."
Facebook said Audience Network will continue to operate on Apple
devices using previous operating systems and those made by other
manufacturers.
Write to Jeff Horwitz at Jeff.Horwitz@wsj.com and Patience
Haggin at patience.haggin@wsj.com
(END) Dow Jones Newswires
August 26, 2020 14:21 ET (18:21 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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