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
As the industry prepares for Apple’s change in users’ iPhones settings in the name of privacy, analysts at MKM Partners said on Tuesday that some online advertising companies like Facebook and Snap will be more exposed to impacts on mobile advertising than your pairs.
Apple’s move will have a privacy option for users to share their advertising ID, or “IDFA”, which was previously buried on users’ phones and place it in front and center when they open an app. Before using an application such as Facebook that tracks your data for targeted advertising, you will be asked to enable tracking. Companies like Facebook fear that Apple’s warning will discourage people from allowing tracking, thus limiting their ability to target ads, the core of their business.
Industry participants currently use this ID, when available, to target ads and measure their effectiveness. But the change is expected to have a dramatic impact on advertisers’ ability to target ads the way they have done, as people are unlikely to accept it.
A mockup of the pop-up window that iPhone users will see before using an application that tracks their data. This image was provided by Apple.
Apple
MKM analysts said they created a structure based on seven factors to determine the risk of change for online advertising companies. Factors include scale, access to primary data, exposure to iOS devices, relative revenue from app install ads revenue, off-platform ads, ads purchased by small businesses, and ads purchased by industries that rely heavily on acquisitions of paid mobile users . Broadly speaking, these companies include games, dating, greeting and streaming video.
Analysts said that based on these parameters, Facebook and Snap have the greatest potential for resistance due to changes in the IDFA, followed by Twitter and Pinterest. They said that Google and Amazon have the lowest relative exposure.
“However, when it comes to gravitational pull, relative ad effectiveness and access to proprietary data compared to other subscale platforms, programmatic ad networks and publishers, we expect the Big Six online advertising companies to do better than the rest of the industry “, they wrote. “We expect more attention on this issue as we move closer to 4Q earnings / 2021 outlook, and we would be buyers due to the weakness, mainly in FB and SNAP shares, attributable to the upcoming changes in iOS 14.”
In a December note, Bank of America analysts also said that Facebook and Snap are at the greatest risk from the changes, potentially creating a 3% headwind for Facebook and a 5% headwind for Snap. They argue that Twitter has modest exposure to mobile app downloads, but the exposure is relatively small compared to Facebook and Snap. Pinterest and Google are the least exposed to IDFA, they said.
Facebook has been openly talking about the change, most recently running ads in newspapers, posting a new website and blog post outlining its arguments against Apple about the change that claims “threatens the personalized ads that millions of small businesses depend on to find and reach customers. “Facebook, in its blog post, argued that Apple’s new tracking rules are” about profit, not privacy “and said it believes Apple is behaving anticompetitively when using App Store control in a way that benefits your results at the expense of developers and small businesses.
Apple told CNBC that the privacy feature gives iPhone users more control and transparency over how their data is tracked and used for advertising, and that applications will be able to explain the benefits of tracking to users at the prompt.
In outlining positive arguments for the advertising ecosystem with respect to IDFA changes, MKM analysts said that companies with scale and access to primary data will benefit as advertising dollars gravitate towards that type of platform. They also said that the ad ecosystem is already dealing with a growing focus on privacy and that secular trends have become stronger, despite the headwinds caused by privacy regulation.
But in describing their pessimistic arguments, they said that the effectiveness of mobile ads could also decrease, as the measurement will become more “confusing” and that companies with limited primary data will face headwinds. They also wrote that off-platform advertising may become less effective, as cross-device advertising may not be able to rely on the same device signals as it did before.
– CNBC’s Michael Bloom contributed reports.