Apple privacy moves to kneecap Facebook revenue
The upcoming iOS 14 update will give users the option to choose which apps have their personal information
Most mobile users may not be aware some apps installed on their devices are tracking them across websites and other apps for targeted advertising, but the upcoming roll-out of Apple's iOS 14 operating system could potentially disrupt the practice as it would notify users and allow them to decide if they will allow tracking of their digital footprints.
This update complies with Apple's App Tracking Transparency (ATT) privacy protection framework.
Many users are expected to opt out of the tracking option when they receive a notification from the system for personal data privacy.
The iOS 14 system sends a pop-up to users, alerting them the apps track their digital footprints, with an option to refuse the tracking.
Apple said the move is being made in the name of privacy.
This practice has drawn the ire of some renowned apps, particularly Facebook, which could be at risk of losing a huge chunk of revenue from targeted ads.
According to Statista, a statistics website, Facebook generated US$84.2 billion in advertising revenue worldwide in 2020. This makes up almost the entirety of the total revenue of $86 billion the company reported last year.
In response to Apple's move, Facebook stated scores of small and medium-sized enterprises (SMEs) are reliant on social media ads to draw customers, and could be at risk of faltering if the move comes into effect.
Snap Inc, owner of popular photo-messaging app Snapchat, has also expressed concerns about Apple's move, saying it could pose a risk to advertiser demand.
The global trend is shifting towards personal data protection and privacy. This could make it tougher for apps and platforms to freely make use of customer data for their personal gains.
Thailand's Personal Data Protection Act (PDPA), which will be fully enforced this June, also hinders targeted online ads.
Digital marketers and SMEs have been advised to adapt quickly to this trend and related regulations.
Apple is giving importance to user privacy and offering options to ensure user data protection. Nutthawat Wichieanbut
DEATH OF COOKIES
"We are moving into the era of what we call 'Cookie Crumble', or some say 'Death of Cookies'," said Maureen Tan, chief executive of advertising agency Wunderman Thompson Bangkok.
"The latest announcement from Apple on ATT is not new, but it makes the privacy rights of its users a priority."
Google announced last year it will no longer support third-party cookies by 2022 for Chrome. Some browsers today such as Safari and Mozilla Firefox already do not support third-party cookies.
According to Ms Tan, ATT will hurt Facebook the most.
Facebook relies heavily on understanding what a user does outside of its app to market a user relevant ads on Facebook, she said.
"With ATT on iOS, Facebook's ability to be 'intelligent' and hyper-targeted will be affected," said Ms Tan.
Google should be less affected by ATT as the majority of Google's ad revenue comes from search results pages, where a search query is presented with organic search results and relevant ads, she said.
According to Ms Tan, 73% of mobile users in Thailand use Android devices and 15% use the iOS system. Facebook and Google still see the lion's share of advertisements spent on their platforms in Thailand.
Non-Facebook and Google ad spending is not as high. Whether the advertiser is a big company or small SME that markets frequently on Facebook or Google Display Network, the larger effect will come from the 15% of mobile owners who use iOS, she said.
"This means the ability to be razor sharp in targeting and re-targeting will slowly and surely be towards this 15% of iOS users," said Ms Tan.
Thailand's PDPA)is to be fully enforced this June. 123RF
EFFECTS FROM ATT
She said there are four aspects to the ATT impact on iOS users.
First, apps and programmatic placements across the open web will see a drop in targeting power and control, which will eventually create inefficiencies and poorer ad personalisation. More work needs to be done to reach the right audiences on iOS, especially on platforms like Facebook, said Ms Tan.
Second, personalising advertisements will become tougher and will deprive marketers of key data on the performance of advertising campaigns, she said.
Third, the results of ad spend on Facebook will be more estimated for reach, impressions and conversions among iOS users that Facebook cannot track in coming future.
"Finally, look-alike audiences on Facebook may also be affected as the custom audiences you are capturing on iOS may not be as accurate anymore," Ms Tan said.
Apple's ATT should have a snowball effect, with other tech giants following suit at some point, she said.
There will soon be a "morale" debate and a big focus on bringing back users' data privacy rights through concrete actions, said Ms Tan.
"This is a sure predictor that the death of cookies will fundamentally change how online advertising works," she said.
FAST ADAPTATION NEEDED
Ms Tan said marketers who have long relied on Facebook and other tech giants need to be prepared for the short- and long-term effects from ATT.
"It is now time to adapt fast," she said. "If brands have their own apps in Apple Store, pop-up notifications to seek consent should be planned for immediately."
Marketers may also need to revisit other strategies, said Ms Tan.
"Strategies such as contextual advertising may be the real comeback kid with ATT in place," she said.
"Contextual targeting is a form of personalised advertising that enables your Google pay-per-click ads to appear on relevant sites."
Another solution is businesses may need to collect data themselves.
"This is the time to build a real connection with your customers as you would if you own a single shop where the shopowner knows you by name, your interests and preferences," Ms Tan said.
She said there are still plenty of platforms that can integrate and collect data from multiple channels into a cohesive system, and businesses can make use of them.
CUSTOMER DATA OWNERSHIP
Pawat Ruangdejworachai, president of the Media Intelligence Group (MI), a media planning and creative agency, said Apple's ATT, Google Chrome's data policy as well as the PDPA could hinder the growth of Thailand's digital market advertisement spending.
New policies and features may hamper the accuracy of targeted audiences, whose information includes gender, age and location.
Large corporations who have their own customer databases can leverage existing data to analyse and decide their own advertisement spending plans.
But SMEs, who do not have their own customer database or big money to spend, could be hit the hardest.
"During this time, local SMEs may need to collect and own customer data themselves rather than merely relying on social media platforms for advertising," said Mr Pawat.
The PDPA is a point of concern for digital marketers because the use of targeted ads could be a breach of the law, he said.
According to Mr Pawat, marketers may need to focus on some targeted groups on social networks for advertising as they can reach their targets directly.
For example, marketers may find a group dedicated to luxury watches on social media and they can engage with them. This group could also lead to other high-end segments, such as luxury cars and property.
Marketers may choose websites that contain niche content for targeted groups and place banners to reach them.
Brands can also make use of influencers to communicate with their specific targets, he said.
Prinya Hom-anek, a cybersecurity expert, said the war between Facebook and Apple reflects a personal data privacy paradox.
Apple is giving greater emphasis to user privacy and designing its system to ensure user data protection. But technology is progressing quickly and it is becoming hard for humans to catch up and protect their own data, he said.
Referring to PDPA compliance, Mr Prinya said many executives and people may look at it as a cost, but the law is meant to ensure personal data is properly protected.
By complying with the PDPA, it can help ward off data leakage, helping the reputations of businesses, he said.
"Complying with the PDPA is an investment, not a cost," said Mr Prinya.
Paiboon Amonpinyokeat, a managing partner at P&P Law Firm, said Apple's move on consumer data protection shows it has the potential to comply with the EU's General Data Protection Regulation as well as the PDPA.
After the PDPA is fully enforced, Facebook and audio-based social networking app Clubhouse would have to receive consent from users to comply with the law, otherwise they could face punishment for violating the PDPA, he said.
"Foreign firms based outside of Thailand that collect and exchange personal data in the country are also subject to the PDPA," said Mr Paiboon.
Panutat Tejasen, better known as Dr Jimmy, a tech entrepreneur and software developer, said ATT should be beneficial for consumers, but detrimental to Facebook.
The move regresses the ad environment back to the pre-Facebook period, when advertisers themselves needed to figure out ways to reach out to their targets, he said.
Chalee Asavathiratham, chief digital banking officer at Siam Commercial Bank (SCB), said the bank announced a privacy notice on storing, using and disclosing the personal information of customers in May 2020.
Customers have to provide consent for SCB to use this data to provide services and develop new features.
SCB has been preparing to comply with the PDPA through SCB Easy, the bank's mobile application, by embedding a feature on data privacy management whereby customers can accept or decline the bank's permission to access personal data, said Mr Chalee.