Facebook Says New iOS 14 Privacy Features Could Kill Its Ad Network

Opt-in Tracking Could Cut Ad Revenue in Half
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In another example of how much more emphasis Apple puts on protecting the privacy of its users than catering to big developers, Facebook is railing against new privacy changes in iOS 14 that could have a massive impact on the advertising business that forms the bread and butter of the social media giant.

While Facebook is of course free for consumers, somebody has to pay for all of the infrastructure that allows it to support nearly a billion end users, and as with many other “free” services, the bulk of that comes from the advertising that Facebook serves up to hundreds of millions of people each day.

As Google discovered almost two decades ago, however, when it comes to pushing ads, the real money can only be found in targeted advertising, since businesses are willing to pay considerably more when they know their ads are going to be seen by the proper sets of eyeballs.

In other words, rather than just showing a random ad for something like tennis balls to everybody who visits Facebook, there’s far more value for those ads to be shown to people who are more likely to buy tennis balls — those who have demonstrated an interest in sports in general, or even in tennis more specifically.

Over the years, advertisers and web developers have built up a fairly complicated network to track all of this information, building connections between your activity on sites like Facebook, Google, and Amazon to show you the most relevant ads, which results in more money in the pockets of these internet giants who are effectively selling your attention as their actual “product.”

If you’ve ever wondered why products that you searched for on Amazon suddenly show up in ads on Facebook, it’s because these tracking networks are working as designed, and while some have no problem with the technology — after all, if you’re going to see ads anyway, they might as well be ads that actually interest you — others consider it a huge invasion of privacy and are even maybe a bit creeped out by the idea that their every move is being tracked.

Apple and Advertising

Apple is of course about the only big tech company that has virtually no interest in becoming an advertiser at all, as it makes almost all of its money from selling hardware and tangible services directly to consumers. In fact, other than its abandoned iAd network, Apple has never been in the business of selling advertising, and the closest it comes to making money directly off of that is its multi-billion dollar deal with Google for default search engine placement in Safari.

This puts Apple in a particularly unique position to focus in user privacy instead, since it has virtually nothing to lose by introducing technologies that help close the door on invasive search tracking, and it’s been gradually upping its game over the past few years with several new features in Safari that discourage this kind of tracking.

Now Apple is taking the next big step in iOS 14, which will require users to grant permission whenever an app or website wants to use a unique advertising identifier to track a user.

This identifier called the IDFA, or “Identifier for Advertisers,” is a unique device ID number that remains the same across every app and website you visit. While it doesn’t specifically identify you personally, it does let advertising networks know every ad you’ve seen and every site you’ve visited, allowing them to draw the necessary connections to bolster the effectiveness of their ads, especially when taken in the aggregate.

For example, it might be valuable information to discover that 74% of the iPhone users in New York City who spend an hour a day or more on Facebook and order pizza three nights a week are also more likely to search for beer, raccoons and green tennis balls.

This is the kind of boring and esoteric statistical data that advertising networks are made up of, but it also allows ad networks to target ads more effectively since a sports equipment maker can now develop marketing campaigns in NYC that are designed to appeal to pizza-eating-and-beer swilling raccoon fans.

Facebook’s Problem

In a blog post this week titled Preparing our Partners for iOS 14, Facebook spelled out exactly how big of an impact this new privacy change could have on its advertising business, stating that it could lead to such a huge drop that it might become impractical to continue running its advertising network on iOS at all.

Known as the Facebook Audience Network, the system allows mobile software developers to create in-app ads that can be targeted to users based on data that Facebook has collected from them.

It’s a business very similar to Google’s, where Facebook maintains an extensive “social graph” of profile data on all of its users, and then basically sells a service that allows developers to make use of that data in order to target ads. Facebook of course never gives advertisers the actual data — that’s the gold in the vault — but it does provide a whole set of APIs that let businesses choose specific demographic groups where they can target their ads.

We know this may severely impact publishers’ ability to monetize through Audience Network on iOS 14, and, despite our best efforts, may render Audience Network so ineffective on iOS 14 that it may not make sense to offer it on iOS 14 in the future.

Facebook

While Facebook gets almost all of its revenue from advertising, it’s unclear how much of that comes from its Audience Network, since it also has its own advertising channels that are tied to actual businesses, whereas the Audience Network is a tool for mobile developers to use in order to help target their ads.

This is not a change we want to make, but unfortunately Apple’s updates to iOS 14 have forced this decision.

Facebook

What’s interesting is that Apple’s iOS 14 privacy policies don’t prohibit collecting IDFA tracking info from users — they simply require that users grant permission before the device ID can be collected. However, Facebook appears to have decided its better to avoid the issue entirely, and has said that its apps on iOS 14 will not even attempt to collect the IDFA at all. However, it sounds like Facebook is being a bit disingenuous here by putting the blame on Apple, saying that it’s being forced into this decision.

What This Means for You

Unless you’re a mobile software developer who relies on the Facebook Audience Network, chances are good that you don’t have much reason to be alarmed by this, and in fact we suspect many users will hail it as a good thing overall.

While there’s much room for debate about whether ad tracking is invasive or helpful, there’s no argument at all that users should have a choice as to whether or not they want to participate in this kind of tracking, and with iOS 14, Apple will be giving its users that choice in a way that third-party developers won’t be able to override.

Much of the value for demographic advertising data comes from the very fact that it’s possible for companies like Google and Facebook to get this kind of data from users, and while there’s certainly going to be a short-term impact as Apple potentially closes this door for over a billion iPhone and iPad users, the industry will hopefully learn to adapt and find less invasive ways to make money through advertising.

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