🥽 MGS Deep Dives IDFA: The unseen forces behind Apple’s IDFA policy changes – with John Koetsier, Columnist at Forbes 🍎

John Koetsier sees the effects of the imminent IDFA changes in iOS 14 happening in real-time. As a Forbes columnist, he has seen from close up the changes in the mobile ad tech ecosystem over many years that have led us to this point.

In our keynote chat, organised by Mobile Growth Summit, John shares his speculations about the reasons why Apple is executing such a huge shift in its IDFA policy. What are the pressures and/or motivations at play here?

In examining these reasons, we can perhaps predict trends of big tech. Apple’s actions will not stand alone; Google and Facebook are sure to not only react, but to come up with their own policies. We talk about the future of privacy, and how it collides with targeted marketing. And more importantly, where does ad tech go from here?

KEY HIGHLIGHTS

🔒 Privacy has always been critical for Apple.

👎 Why Apple views ad tech negatively.

😈 What might bad actors do with readily accessible IDFAs?

⚡ How IDFAs were an improvement for privacy in user tracking, but still dangerous.

🗣️ Politics plays a bigger role than you think.

📊 Cambridge Analytica 2.0?

⚔️ Big Tech frenemies: Apple, Google, and Facebook.

🦸 Champion of the little guy? Apple and its optics.

⁉️ Why too many privacy choices is as good as no choice at all.

⏰ What may have precipitated the extension of Apple’s deadline.

🏋️ Why Facebook’s decision to opt out is a power move.

⏭️ Be prepared: Android is probably next.

☯️ The huge distinction between HAVING an ad network and BEING an ad network.

🔐 How differential privacy may be the answer.

🌍 Privacy is a global trend and ad tech has to adapt to survive.

KEY QUOTES

Why Apple seems to be against ad tech

Two of the things I put in there were: I think Apple thinks that ads are bad for user experience, and that ad tech is at best negative, at worst dangerous.

IDFAs are open to misuse

So in 2015, the FBI actually went on to a plane on the tarmac, and arrested a Chinese national. He was about to take off for China, and he had a thumb drive in his possession which was full of IDFAs. He’d previously worked for Machine Zone and quit days earlier. So there’s lots of possibilities here. And of course, this was before the whole China-US massive blow up: Cold War, economic war, all the things that are going on right now.

The dangers of trackability are well documented

The New York Times showed us, I believe it was in December 2019, how easy it is to track a member of the Secret Service, who is presumably travelling along with the President. They are going to various areas in Florida, where the winter White House is; the White House, and other places like that in New York City. So you can actually track people really, really closely. And you may not want to do that for me or you or just an average person, but you may want to do that for somebody who is part of an entourage or somebody who’s super famous or something like that. So there’s some power in misuse of IDFAs.

Why Google and Facebook care about advertizing

Google is essentially an ad network; Facebook is essentially an ad network. They both do many more things. But if you look at where their money comes from, that’s where it comes from. That’s what they are. Anything that weakens them, anything that makes advertising less successful, less lucrative, less obvious as a business monetization strategy is potentially good for Apple, because all the big tech companies are cooperators, they’re frenemies.

Why Apple isn’t motivated to help ad tech

Apple doesn’t make money when an app publisher monetizes via apps. They don’t get any of that revenue. They make 15 to 30% on in-app purchases and subscriptions. So you do the math. I don’t think that’s a primary reason for the change, but it’s definitely one of them.

Google and Facebook are motivated to find solutions

Apple has an ad network; Google is an ad network. They have to build solutions that still work for their ad network. I think personally, that they’ll probably do something around differential privacy. And they’ll probably group people into 1000- or 5000-person cohorts or segments that can be targeted. You know, the reality is that every marketer wants granular data, but almost zero marketers use totally granular per user type data. So there’s probably an in-between solution here that’ll make the ad tech space much safer one for privacy, and still allow ad publishers and mobile marketers to do what they need to do.

Opposing trends for privacy and ad tech

I think the “secular trend” here is towards privacy. And let’s just be honest, this is the opposite trend that we’ve seen in ad tech, which has been to more and more tracking, at a more and more granular level.

FULL TRANSCRIPT BELOW

Welcome to MGS Deep Dives IDFA. This is our keynote chat. The topic is how Apple is disrupting mobile as we know it. We have Shamanth Rao, founder and CEO of RocketShip HQ. And John Koetsier, journalist, analyst, futurist at Forbes.

From freemium to “you are the product” products. Mobile is still an incredibly new industry that is built on advertising. But Apple just blew up the key log in the ecosystem. Now an $80 billion industry that influences trillions in global spends is about to experience a hard fork. I’ll leave it to you guys, Shamanth and John. Thank you so much for joining us.

Shamanth: Thank you to the folks at MGS for hosting us today. John, definitely excited to speak with you because you’re certainly written very extensively about the seismic changes that are afoot. Yours are articles that I point a lot of people to, to get an overview of how things are. A good place to start, perhaps, would be with the basics, as you’ve followed all of this unfold. Why do you think Apple made this move and made this change to have IDFAs be opt-in?

John: I think there’s at least four reasons for that, Shamanth. And one of them is the obvious unstated reason: that’s privacy. Apple has set its position, its stake in the ground, saying that: “We are the big tech company that is FOR privacy for users.” So I think that is real. And I think that’s important. And I think that that encompasses a lot of different things: there’s competitive positioning there; there’s strategy there; there’s also liability. So that’s one big reason.

I think a second reason is deep down culturally, Apple is not a big fan of ads, and especially ad tech. I recently tweeted out what I thought Apple was thinking, you know, some of the things behind them.

Two of the things I put in there were: I think Apple thinks that ads are bad for user experience, and that ad tech is at best negative, at worst dangerous.

So I have a friend with a major publisher who DMed me after that and said—it’s off the record so I can’t say the name or the publisher— “That’s absolutely correct.” Top Apple executives have told him exactly that.

So I think those are two of the reasons. A third… there’s some political reasons for it. There’s a fourth; there’s some monetary reasons. We’re going to get into both of those a little bit later, as we go through this presentation. But the biggest by far is privacy.

Shamanth: Yeah, and speaking of privacy itself, what might be some of the implications of having IDFAs be readily accessible? What might be some of the things somebody could do? Let’s just say if they had access to them—which at this point of time a lot of people do, right?

John: Yes, a lot of people have a lot of IDFAs and obviously it’s a better identifier then used to exist. The UDID was a hard-coded device identifier, never changed, and excellent for tracking, and excellent for monitoring all those other things. The IDFA can change, you can opt out of it. So it’s a better identifier for advertising. It’s an Apple-created identifier, but it still can be dangerous.

But there’s a lot of things that can be going on here. One, there’s a commercial motive. If you have all these IDFAs, you might know who installed what game, who installed, which apps, and that might give you some insight into what other apps they may be interested in. So that could be useful. And secondly, also in the commercial motive space, you might have an idea of who’s a whale; who’s a big spender in an app. So that can be super, super useful, obviously.

There’s potentially some more serious motives. I mean, commercial motives can be very, very serious. But there’s some political and social motives as well, which people have installed certain apps. Do you know their political leanings from those apps? Can you influence them, with ads in further apps in the future? So you come to a potential, kind of a Cambridge Analytica-type scenario that we saw with Facebook in previous years.

And then finally, you know, maybe the darkest of all, you’ve got a potential espionage motive, right? People have installed certain apps—maybe it’s Tinder, maybe it’s Grindr. Maybe you have the ability to extort them, to expose them or something like that, in some way that would be uncomfortable for them. And then you can do something with that, and you can exert some sort of power with that.

Another way, of course, is trackability. And

the New York Times showed us, I believe it was in December 2019, how easy it is to track a member of the Secret Service, who is presumably travelling along with the President. They are going to various areas in Florida, where the winter White House is; the White House, and other places like that in New York City. So you can actually track people really, really closely. And you may not want to do that for me or you or just an average person, but you may want to do that for somebody who is part of an entourage or somebody who’s super famous or something like that. So there’s some power in misuse of IDFAs.

Shamanth: Certainly. And that power isn’t immediately obvious to the vast majority of marketers who are looking at this decision from their own perspective. And there’s an Apple ad that I think somewhat clearly portrays some of the ways in which private data can be misused. And then they are like: “Look, somebody looked for divorce attorneys five times yesterday. They would not want a targeted ad when they’re hanging out with a wife and looking at the next browser.” So there are things that people would prefer to have kept private, and that can certainly be compromised by IDFAs.

So there’s privacy. You did touch upon other motives that Apple has. So financially and strategically, what might be some of the reasons why Apple is pursuing this course of action?

John: So on the strategic side, Apple is positioning itself as the privacy-focused big tech company. You mentioned that big privacy ad. And Apple’s always been more sort of touchy-feely on the little guy side. The funny thing is that Apple had that positioning, as it was this beleaguered company that was failing and flailing. Now, it’s a giant corporation. It’s a global corporation; one of the largest, if not the very largest, in terms of market capitalization on the planet. Apple is trying very hard—and I’m not saying that this is all posturing or positioning—to be the big tech company that is on the little guy’s side on privacy and doing a lot around that.

On the finance side, which is also important to Apple I think, is what’s bad for my enemy is good for me. So if you look at big tech, and you look at Google, Apple, Facebook, Amazon, Microsoft and a few others, 2 to 3 of those are significantly ad-based.

They’re working together; they’re working against each other. And anything that weakens your enemies strengthens you at that level.

Shamanth: Yeah. And would you say that’s the case, even though Apple has no share of the ad market at this point of time?

John: Yes, absolutely. Because obviously Apple has iAd or Apple ads or Apple search ads, however you want to term it, but it that’s a rounding error right now, and I’m not saying it will stay that way. We’ve seen some evidence of Apple moving its ad network outside of the App Store. We know that Apple is using Apple News and some other of its owned apps, Stocks and others; searches on the App Store to target ads for that. And they could expand beyond, but I do not see advertising in any near or short term future becoming significant to Apple as a global business.

Shamanth: Certainly. So it sounds like Apple’s stance is one of antagonism to an ad-supported business, as you mentioned earlier on in this conversation, they don’t like ad tech at all. And it sounds like that’s part of the motivation for this.

You know, when it comes to privacy, there’s essentially GDPR, CCPA, etc. Does Apple’s policy, which it’s proposing rolling out with iOS 14, conflict with or result in any sort of confusion when you look at different jurisdictions? Or what’s the interplay between these different policies in different areas of the world?

John: Yeah, it’s challenging. It’s really difficult. And I think that Apple’s can conflict with other ones. We’re all affected by GDPR whether we’re in Europe or not, right? We will have these ‘Accept cookies’ or ‘Not accept cookies’, and other things like that every time on the web. There’s a browser extension in Chrome that can just either accept them all or deny them all. I wish there was something for Safari, which I use a little bit more frequently for that. So that’s a pain in the butt.

We’re also impacted by California’s privacy laws. And now we’ve got Apple’s iOS 14 IDFA opt-in. So you have a scenario where you could be asked to opt in to tracking or measurement or other things like that two to three times: for a platform, for an app, for a service, for a website. That’s confusing. That’s annoying. It’s more likely to make people do irrational things, like either default accepting everything or default denying everything, which means it’s almost not a choice anymore on a per-app scenario. So that is pretty interesting.

I think one of the things that I’ll just jump back to in terms of Apple’s motivations is that

Shamanth: Yeah. So it also sounds like, if an app developer makes less on advertising, hopefully they can nudge some of those ad dollars into IAP dollars, which will accrue to Apple. That’s part of the reasoning. Right, yeah.

Of course, at this point of time, the deadline has been pushed out. There’s been an extension. What do you think precipitated that?

John: I think there’s a number of reasons for that. One, and perhaps most important, is the ecosystem was not ready. And I’ve talked to a lot of big developers, big app publishers, and they’re not ready. They haven’t got all their ducks in a row. They won’t be able to measure with SKAdNetwork, as of tomorrow, or whenever iOS 14 finally drops. And so that’s a challenge. Without a healthy ecosystem, Apple suffers. Without a healthy ecosystem on iOS, Android wins. So that’s a big deal.

I do think Facebook opting out is a big scenario here. Facebook basically said: “We’re not going to play in Apple’s sandbox as much as we can. We’re not even going to try and ask for the IDFA. We’re gonna use our own tech, our own logins. We have an internal Facebook identifier for people, so if we tie the IDFA to them, we’re bound by Apple’s rules.” Now, of course, they’re still an iOS app on an iPhone. So there’s still platform rules for iOS apps that they have to follow. But I think that they got more wiggle room for what they want to do by opting out of that game. And so I think that was maybe a bit of a surprise to Apple, maybe a bit of a shock, and maybe something that takes Facebook’s power back a little bit, even though in a sense, they’re just a client on the Apple platform there.

Let’s be clear, let’s be honest. There’s a lot of power at play here. App developers have to do what Apple says, but when you’re bigger, the rules change. Some can influence Apple, like we saw with Basecamp, recently with their email app. But Facebook is “great power” in big tech. Apple can’t not have Facebook on their phone. Apple can’t not have Instagram on the phone or Messenger. If you’re a diehard Apple fan, and you love iOS, and you’re embedded in the ecosystem, but there’s no Facebook, there’s no Instagram and no Messenger, you’re probably looking for alternatives. Because you can’t basically live your life without those tools, if you’re embedded in those tools. They might be important for your business; they might be important for your social life. That gives Facebook power and I’m not sure that Apple anticipated Facebook just completely opting out of the game here. So I think that’s a big reason.

A third big reason, potentially not as big as the others, is SKAdNetwork has time for a few more features. Apple built SKAdNetwork sort of in a back room, with a small team. 1.0 came out in 2019. 2.0 just came out sometime before WWDC in June. And there’s a lot of features in there that show that, at a certain level, they don’t necessarily understand ad tech—which isn’t shocking is not their main business. And so there’s definitely some features that they could add there that could make the world better for marketers, for app publishers and still retain privacy. So maybe they’ll be adding a few more things there. But I think the biggest thing is that the ecosystem wasn’t ready.

Shamanth: Yeah, certainly. And I think this was released a couple of months before iOS 14 is due to come out. That barely gave people time. They are just scrambling and figuring out what is going on. And I think it’s definitely a relief for a lot of developers.

Now to switch gears and look at a different aspect of all of this, which is Google with Android. So Google is subject to the same forces of PR and privacy pressures as Apple is. Or one could argue that could be slightly different forces at play. Where do you think Google might land with Android? They have publicly, you know, personally identifiable information as well.

John: It’s a really good question. I think that they will eventually be forced to follow. You saw that with Chrome and the third party cookie. I think there’s GDPR influence here. They’ve been accused of not adequately following GDPR. And honestly, even the mobile marketing community, perhaps not in the US, but certainly in Europe, to some extent, is calling for it. Some people are saying: “Hey Android, Google has to be next.”

But there’s going to be significant differences here:

And honestly, you could argue that, if Google goes with some sort of differential privacy, putting people in 5000-person buckets and obscuring actual granular data could potentially increase their power. Because all sudden, you have to go back to the well every time, because you don’t know specifically who you’re targeting.

Shamanth: Certainly, differential privacy is definitely going to be more powerful than complete privacy, where you get some amount of performance as compared to where you have no identifiable information whatsoever. So, as of now, the privacy policy changes are expected to kick in early 2021. We don’t know when that is. What do you envision might change between now and then?

John: I think we might see a few more SKAdNetwork features. That would be very welcomed, I think, by a lot of mobile marketers. I think we’ll see a little bit more preparedness from app publishers. I think we’ll see better solutions from MMPS; more fully thought out like: “Hey, install and forget.” Almost, but not quite, because there’s going to be strategy around this, especially with post-install data and other things like that. But the reality is some app publishers are still going to be late. It’s just the reality of the world.

Shamanth: There’s certainly going to be a choppy transition period, at least in the short term, after it kicks in that people scramble to adjust. What do you envision happening long term, to advertising, to mobile apps, to the ecosystem?

John: I think there’s a huge impact here. Economists use the word “secular trend”. And they just mean it’s a global phenomenon. It’s happening everywhere.

We’ve seen this sort of epic flow and ebb of the advertising world. And when advertising started out, we had no idea of what works, which ad works, who are connected to whom; all those sorts of things. Targeting was very, very broad. People started using coupons and codes to learn who was actually seeing their ads and acting on them.

With digital advertising, we got tracking and tracing. We got the ability to look at all the various steps in the customer journey, all the touch points and everything like that. We had these dreams, probably, about seeing all the customer journey and influencing at various stages and everything. That was always a bit of a fantasy. But even more so now, because third party cookies are going away; we know that. IDFAs are going away; we know that to a large extent. And I think that Google Ad IDs are going away probably as well. That means a bunch of things in terms of the entire world of ad tech. And let’s be honest, ads fuel much of the services that we use. Google is free because of ads. Facebook is free because of ads. Gmail is free. So many tools that we depend on, on a daily basis, are free because of ads. So this is going to be a major, major shift.

One of the things, in terms of advertising, is that it will have to go back to contextual for targeting right. And that’s interesting because that means kind of a flight to quality. So, once upon a time, back in the dim mists of digital marketing, if you wanted the Wall Street Journal audience, guess where you got it? On the Wall Street Journal website, right? Or in the actual Wall Street Journal paper. As we’ve been able to disaggregate audiences, or maybe aggregate them from different sources, you could, and you can today, get the Wall Street Journal audience when they play a hyper casual game, or when they’re in Angry Birds or something like that. And so you can go to some other non-related place and target the same people because they do different things, because our lives are varied and we’re in various places. Well, when you can’t actually track people on a granular basis, then you don’t really know who that is in Angry Birds or in some other hyper casual game, so it’s hard to assemble that high quality audience in low cost venues. So in other words, you’ve got a flight to quality, and you are going to have to go back to maybe that Wall Street Journal type area in order to get that audience.

And that means that measuring moves more to incrementality. And media mix models and probabilistic, where maybe you don’t have device IDs, maybe you’ve only got spend data. And you’ve got app data, you’ve got data of what’s happening in your app: who comes in and when they come in. And so we actually have something that’s somewhat closer to multi-touch attribution in some way, shape or form; although it’s not granular, and not per-user or per-customer. But it’s also not just what we have right now, which is last click—which we all know is kind of a joke. Who got their last click in; which shady ad networks got a last click in; or claimed credit for that last click. So that means an interesting change for advertising.

For apps themselves, perhaps there’s also a flight to quality and more focus on monetizing on platform via in-app purchases, via subscriptions and things like that. Guess what? The sorts of things that Apple gets a cut of; the sorts of things that Google gets a cut of as well. And ad revenue maybe moves more to the margins: where you’ve got the cheap, which gets even cheaper and hyper casual, and the expensive on quality platforms gets even more expensive.

So I think those are some of the changes that we might see, because this isn’t just IDFA. We’ve had anti tracking prevention, third party cookie prevention in Safari for some time now, other platforms as well. It’s coming in Chrome. So this is a secular trend that is shifting how ad tech and how marketing is going to work. And I think it’s going to impact a lot of what we do.

Shamanth: Certainly, and I like your phrasing about this being a secular trend. It’s not an isolated incident. This has been an overarching trend that’s been impacting the entirety of the advertising industry and space. And it sounds like where we’re going as an industry and space, is back to where we were before digital media came along, really, in many ways. That’s how we measured things prior to digital. Sounds like that’s the sort of very aggregated anonymized measurement and tracking that we’re going to be headed towards in the future as well.

John: Back to the future.

Shamanth: Back to the future. Indeed, indeed. Yeah. I think that’s perhaps a good place for us to start to wrap up, John. Thank you so much for being on this keynote panel.

John: Thank you, Shamanth. It’s been a real pleasure chatting with you. I hope everybody’s getting some good insight out of this. And I’m just getting a note from our MC that there is no time for Q&A. So guess what? I bet you Shamanth is available somewhere online. It is just a hint. I don’t really know. But I’m guessing he’s on Twitter or something like that. I know I’m on Twitter. So if you have other questions, other topics or thoughts, hit us up, and we’ll answer as best we can.

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