Consider this: You’re an iPhone user, and sometime in September, when you update to iOS 14, you’re greeted by a pop-up when you open an app which says that the app will like to track you across apps and websites built by other companies. You have two options: to either allow the app to do that kind of tracking, or decline it. In short, the update promises to put users more in control about how online services use their personal data; and since most people are expected to choose the latter, digital advertising companies, including Facebook, are worried. For Facebook’s Audience Network, which is the social media company’s ad network for developers, it is expecting a drop of over 50% in revenue. Other developers like the UK-based DMG Media, which owns outlets such as Daily Mail, are reportedly considering nuking their iOS app altogether.

What’s changing? Every Apple device comes with a unique identification code, which can be used to track what users do on their phone. Unsurprisingly, the code, called identifier for advertisers (IDFA) is extensively used by adtech companies, including Facebook to track user behaviour across various services so that they can run targeted ads at them. However, when Apple announced iOS 14, its operating system for iPhones and iPads for 2020, it said that any developer who wants to use the unique code will also have have to take explicit consent from users. This means, iPhone users can expect to see lots of pop-ups like this when they open an app:

How the permission pop-up is set to look like. Source: Apple

How the update might affect advertisers

Facebook said that while it was difficult to quantify the impact to publishers and developers at this point, “in testing we’ve seen more than a 50% drop in Audience Network publisher revenue when personalisation was removed from mobile app ad install campaigns”. However, in reality, the impact to Audience Network on iOS 14 may be much more, the company said.

“It makes it much harder for us to monetize our Apple app users, who are an incredibly loyal readership. And quite frankly, it puts at risk our ability to provide an Apple app,” Martin Clarke, publisher of DMG Media, which owns the UK’s Daily Mail and other publications told Vox. “There’s no point in providing an app for a platform that monetizes less well than other platforms,” he added

Navin Madhavan, vice president and general manager of adtech company InMobi, in his personal capacity tweeted that “With a pop-up as obvious as this, how many users do you think are going to opt-in and let you ‘track’ them? What does this mean for your marketing stack? You should start asking the questions soon.” He also said that Apple’s update doesn’t mean that users will stop seeing ads altogether, just that the ads might not be relevant at all: “[…] this doesn’t mean you won’t see ads any more if you click No. You will of course continue to see them. Earlier there was a small probability that ads may have been relevant, now that small chance also doesn’t exist.”

How Facebook is reacting to this update

Facebook, which relies on the identifier for advertisers (IDFA) to run targeted ads on its iOS app, said that it will no longer collect the unique code, at least till the time Apple doesn’t offer them more guidance. “We believe this approach provides as much certainty and stability that we can provide our partners at this time,” it added.

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

It said that it will release a new version of the Facebook software development kit (SDK) to support the changes to iOS 14. The new version will provide support for the Apple API, SKAdNetwork,  which limits the data available to businesses for running and measuring campaigns. “In light of these limitations, and in an effort to mitigate the impact on the efficacy of app install campaign measurement, we will also ask businesses to create a new ad account dedicated to running app install ad campaigns for iOS 14 users,” Facebook said.

The new update will “disproportionately” affect the Audience Network given its heavy dependence on app advertising, Facebook said. Apple’s updates may render Audience Network so ineffective on iOS 14 that it may not make sense to offer it on iOS 14, it added. However, Facebook did admit that the impact of this update on its own ad business is going to be less compared to ad partners who use the Audience Network.

Facebook raises concerns of small businesses. Again.

In an expected move, Facebook said that Apple’s transparency feature is going to affect small businesses more. “We understand that iOS 14 will hurt many of our developers and publishers at an already difficult time for businesses. We work with more than 19,000 developers and publishers from around the globe and in 2019 we paid out billions of dollars. Many of these are small businesses that depend on ads to support their livelihood,” it said.

Does Apple want in on the ad business?

Apple recently became the world’s most valuable publicly listed company, but even then, digital advertising is not its strongest cash cow, with only the App Store and Apple News bringing in some kind of revenue from ads. However, Madhavan suggested that with this particular update, it might have booked a “seat on the table in the advertising ecosystem. They have also managed to pull back all the players of an ecosystem who were light years ahead of them back with this simple so called privacy-first masterstroke”.

*Update on August 29: We had incorrectly spelt Navin Madhavan’s name, and have rectified it. Error is regretted.