Apple CEO Tim Cook makes a presentation during the European Union privacy conference at the EU Parliament in Brussels, Belgium, on October 24, 2018.
Yves Herman | Reuters
Snap and Unity Software, which reported fourth-quarter earnings after Thursday’s bell, warned of the impact of Apple’s privacy changes set for this spring.
To target mobile ads and measure their effectiveness, app developers and other industry players often use the Apple Advertiser Identifier (IDFA), a unique string of letters and numbers on each Apple device. But once a privacy update is released, app manufacturers will be forced to ask for permission to access a user’s IDFA through a prompt. A significant proportion of users are expected to say no, which should make targeted advertising less effective.
The changes have become a major point of contention for advertising companies, such as Facebook, which looks set to lose revenue from the move. But Facebook is far from alone.
Unity Software said in its earnings report that changes to IDFA will affect the way mobile game developers get new customers and “how they optimize lifetime customer value”.
“While it is difficult to estimate, our guidance assumes that the IDFA changes will begin in the spring and will reduce our revenue by approximately $ 30 million, or 3% of revenue, by 2021,” wrote the company.
In comments prepared for his fourth-quarter earnings report, Snap’s chief financial officer, Derek Andersen, said that Apple’s changes would pose a risk of demand disruption once implemented.
“It is not yet clear what the long-term impact of these changes may be to the frontline momentum of our business, and this may not be clear until several months or more after the changes are implemented,” he said.
Apple is currently testing the privacy update on a beta version of iOS 14, which it hopes to release to all users in “early spring”.
Snap’s business director Jeremi Gorman said that Snap has been working with Apple to prepare for the changes, educating its advertisers and making long-term investments to use more of its own data for advertising. In addition, the company plans to provide advertisers with more opportunities to deliver its products and services to Snap users directly through Snapchat.
“The reality is that we admire Apple and believe that they are trying to do the right thing for their customers,” she said. “Their focus on protecting privacy is aligned with our values and the way we built our business from the start.”
She added: “Overall, we feel very well prepared for these changes, but the changes in this ecosystem are often disturbing and the outcome is uncertain.”
Both companies’ shares fell in after-hours trading on Thursday, with Snap off more than 10% and Unity more than 15%.
CNBC’s Salvador Rodriguez contributed reports.
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