Big news from Apple this week as they begin releasing highly-anticipated iOS 14.5 updates. Labeled as a huge win for privacy advocates and consumers, many e-commerce brands and marketers have been bracing for months, fearing significant impacts to ad targeting & conversion.
Among the loudest of Apple’s opposition, Facebook claims that changes could have an adverse impact on e-commerce sales, noting a study that anticipates a 60% decrease in online ad revenue.
As spectators to this battle of titans, we are left to wonder, should e-commerce brands expect to see diminished returns on Facebook in 2021? Let’s dig into the facts.
Facebook v. Apple
The fundamental arguments are simple; Facebook claims to be an ally of small businesses, while Apple says it’s protecting its consumers’ privacy.
Facebook’s 10 million advertisers are mostly small businesses (80 percent of small businesses said they relied on social media for marketing in a 2017 study by emarketer), and Facebook says it’s fearful of a tremendous drop in return on advertising spending because the wrong audiences will be catered to due to lack of insight.
“While it’s difficult to quantify the impact to publishers and developers at this point with so many unknowns, in testing we’ve seen more than a 50% drop in Audience Network publisher revenue when personalization was removed from mobile ad install campaigns,” reads a blog post by Facebook.
One of Facebook’s main selling points is its ability to use data to custom-tailor ads to individuals, which is obviously useful for marketers. Targeted ads are also more expensive to take out than more general interest ones. Another is Facebook’s ability to prove to marketers that their ads are working, which is important to the company because over 98 percent of its global revenues (over $70 billion in 2019) come from advertising.
“I do want to highlight that we increasingly see Apple as one of our biggest competitors. iMessage is a key linchpin of their ecosystem… we are also seeing Apple’s business depend more and more on gaining share in apps and services against us and other developers. So Apple has every incentive to use their dominant platform position to interfere with how our apps and other apps work, which they regularly do to preference their own,” said Zuckerberg in a recent quarterly earnings call.
“By making tracking more difficult, it could be pushing free apps toward paid services to make up for revenue lost from targeted advertising. (Apple takes as much as a 30 percent cut of in-app sales.) Or it could be working to preference its own tracking technologies that allow it to make digital dossiers based on consumers’ behavior within Apple apps and services,” according to a recent New York Times opinion piece.
And if Americans had it their way, it seems they would prefer to keep every move they make to themselves, according to a recent survey by TapResearch which revealed that less than one in four respondents were likely to allow tracking if given a choice.
How will the iOS update directly impact the Facebook Ad Platform?
Our media analysts believe that, although Facebook may be overstating its case, Apple’s changes pose a genuine threat to e-commerce brands who rely on Facebook advertising. Here are some changes advertisers can anticipate:
- Reduced Personalization: Given that ad personalization is the cornerstone to the Facebook Ad Platform, opt-outs threaten to diminish the quality of the data pool and undermine a distinct competitive advantage.
Delayed Reporting: Real-time reporting will not be supported, and data may be delayed up to 3 days. Web conversion events will be reported based on the time conversions occur and not the time of the associated ad impressions.
Estimated Results: Statistical modeling may be used to account for results at the ad set and ad levels, unless the campaign is composed of a single ad set and ad. For web conversion events, statistical modeling may be used to account for conversions from iOS 14 users.
No Breakdowns: Delivery and action breakdowns by age, gender, region, and placement will no longer be supported for web and app-based conversions.
- Changing Attribution Windows: Fully implemented, iOS 14 updates will require attribution windows for all active campaigns to be configured at the Ad Set level, rather than at the account level.
Going forward, 28-day click-through, 28-day view-through, and 7-day view-through attribution windows will be depreciated in exchange for new narrow-scope windows.
- 1-day click
- 7-day click (default after Apple prompt enforcement)
- 1-day click and 1-day view
- 7-day click and 1-day view (initial default)
How will iOS 14 changes impact ad performance?
Our analysts predict that opt-out activity will significantly affect ad efficiency for advertisers using the following targeting methods, which are crucial tactics for all e-commerce advertisers.
- Conversion Targeting: Given that the “likelihood for purchase” algorithm is derived from behavior data that will be blocked by App Tracking Transparency, e-commerce advertisers running conversion-optimized campaigns will likely be the first to notice a lag in efficiency.
- Lookalike Audiences: Advertisers targeting lookalike audiences are also vulnerable to the proposed privacy changes. The lookalike algorithm identifies customer prospects by comparing behavior data to that of existing customers, so if prospects opt-out there will be no basis for comparison.
- Site Visitors: Advertisers setting Facebook pixels will also see a significant drop in efficiency. The iOS updates will inevitably limit brands’ ability to retarget opt-out visitors with Facebook ads.
What should advertisers do to prepare for iOS 14 opt-outs?
Ultimately, the magnitude of the impact that Apple’s changes will have won’t be clear until they go into effect. Still, because opt-outs hit at the core of Facebook’s effectiveness as an ad platform, brands should take them seriously and prepare contingency plans. Here are a couple steps we recommend:
- Manual Targeting: Let this be a lesson for all those who replaced workers with robots; when technology fails us, we’ll need analog options close at hand. We recommend that advertisers hedge their bets against artificial intelligence with investments in customer research and manual targeting.
- Channel Diversity: The relative maturity of Facebook’s algorithm makes it more vulnerable than competitors like Snapchat, Pinterest, and TikTok. In the wake of iOS 14, we are likely to see alternative platforms fill the vacuum in customer acquisition. We recommend that advertisers diversify their channel mix to minimize the impact of future changes.
At the end of the day, Apple’s updates have the potential to usher in a new paradigm in online advertising. Although Facebook ads will continue to be a good way to reach consumers, the platform and its advertisers may need to take big steps to adapt and maintain ad effectiveness.