Changes in Digital Privacy Impact Online Advertisers

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By: Mathini Ilancheran -- Principal Analyst

22 November, 2021

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Changes in Digital Privacy Impact Online Advertisers
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Introduction

The digital advertising market is growing rapidly, with the pandemic leading to more consumers using e-commerce platforms to shop and increased social media usage. This has led to the growth of $350 billion digital advertising market, with digital ads powering the growth of companies, such as Google, Facebook, Twitter, etc. In exchange for the free search and networking services offered, consumers are tracked through “cookies” and their personal data is used for targeted ads. This raised a concern of online privacy fears, with a few technology companies revamping their rules in collecting online data, to keep their consumers safe. Eventually, this reinvention of the system has affected online advertisers and dismantled the billion-dollar digital advertising industry [1].

Recent Changes in Digital Privacy

With privacy and consumers safety being a priority in this era, technology companies, Apple, restructured their online data collection system. Prior to this, in 2020, Google announced, in the next two years, Chrome will not support third-party tracking cookies, making web browsing more secure for users. This would cause an impact on the entire ecosystem of online advertisement, who depends on cookies for targeted advertising [2].

The recent introduction of Apple’s privacy changes in iOS 15, iPadOS 15, macOS Monterey, and watchOS 8 affects Apple’s ID for Advertisers (IDFA). The IDFA is an identifier used to track iOS users’ activity in apps, which digital advertisers use to better target ads. In the past, users had the option to opt-out of being tracked, but with the latest operating system, all apps will have to ask each user permission before they can track their data [3]. Hence, with Apple’s App Tracking Transparency (ATT), it becomes mandatory for developers to provide the type of user data being collected, how the data will be used, and also, identify what data any third-party source would collect. The ATT has caused worries among several digital advertising and gaming companies, increasing the cost and complexity for brands to advertise on social media platforms [4].

Impact on Online Advertising Market

The above transformation in privacy has a huge impact on ad technology vendors, who gather data by tracking what people do online and on their phones, in turn, helping their clients in targeted advertising. They also track if consumers buy the targeted products in ads, hence, bringing value to their clients. The below are the highlights of the industry impact as a result of the privacy change [3] [2] [5] [6] [7].

digital ad

Sources: qz.com, www.forbes.com, news-block.com, www.marketingdive.com

Case Examples of Companies Impacted vs. Not Impacted

digital ad market

Sources: www.axios.com, www.reuters.com, www.cpomagazine.com, www.nytimes.com

The IDFA changes will not have a long-term impact on big tech companies, as they have the capital to invest in new solutions. However, small business digital marketing campaigns on social media become less effective [8] [7] [9] [10] [1].

The Future – What are Needs for Ad Agencies to Survive

Moving forward, it is important for brands to collect their first-party data to generate a better understanding of their customer, to obtain actionable insights. Working on a strong marketing strategy also provides a significant advantage [2]. Companies should not rely only on advertising for revenue and adapt to the changing environment by charging subscription fees or using AI to help serve ads [1]. Web push notification is an emerging marketing channel, which is directly controlled by the browser that the visitor uses and could be further explored [11]. On the big tech front, Facebook is currently developing ways to target people with ads using insights gathered on their devices, without allowing personal data to be shared with third parties. Google is already on the plan to disable cookies, but will not block trackers in Chrome until 2023 [1].

All of the above-mentioned impacts on the online advertising market, along with the constraints, such as ad fraud & blockers, lack of control over ad placement and the disapproval of third-party cookies could eventually lead to the burst of the paid advertisement bubble [2].

 

References        

[1]       B. X. Chen, "The Battle for Digital Privacy Is Reshaping the Internet," 16 September 2021. [Online]. Available: https://www.nytimes.com/2021/09/16/technology/digital-privacy.html.

[2]       S. Goswami and F. T. C., "What Apple's Privacy Changes Mean For The Tech Industry," Forbes, 10 February 2021. [Online]. Available: https://www.forbes.com/sites/forbestechcouncil/2021/02/10/what-apples-privacy-changes-mean-for-the-tech-industry/?sh=10e80b6e6944. [Accessed November 2021].

[3]       N. Rivero, "Apple’s privacy update shows the massive power of small design changes," Quartz, 26 April 2021. [Online]. Available: https://qz.com/1997873/apples-idfa-privacy-update-threatens-to-upend-the-ad-industry/. [Accessed November 2021].

[4]       Reuters, "Beware, Facebook & Google! iPhone privacy changes hint at Apple's big move to digital ad market," The Economic Times, 2 October 2021. [Online]. Available: https://economictimes.indiatimes.com/magazines/panache/beware-facebook-google-iphone-privacy-changes-hint-at-apples-big-move-to-digital-ad-market/articleshow/86705071.cms.

[5]       H. Roy, "Cost of Apple Tech Titans’ privacy rule estimated $ 9.85 billion in revenue," Newsblock, 7 November 2021. [Online]. Available: https://news-block.com/cost-of-apple-tech-titans-privacy-rule-estimated-9-85-billion-in-revenue/. [Accessed November 2021].

[6]       R. Williams, "Apple's privacy changes drive up ad prices for e-commerce marketers," Marketing Dive, 23 September 2021. [Online]. Available: https://www.marketingdive.com/news/apples-privacy-changes-drive-up-ad-prices-for-e-commerce-marketers/606976/. [Accessed November 2021].

[7]       S. Dang and N. Balu, "Facebook ad revenue seen feeling brunt of Apple privacy changes," Reuters, 25 October 2021. [Online]. Available: https://www.reuters.com/technology/facebook-ad-revenue-seen-feeling-brunt-apple-privacy-changes-2021-10-25/. [Accessed November 2021].

[8]       S. Fischer, "Apple's privacy changes eat rivals' businesses," Axios, 26 October 2021. [Online]. Available: https://www.axios.com/apples-privacy-changes-eat-rival-businesses-e951d3aa-d112-4b0b-8074-78010a5189a6.html. [Accessed November 2021].

[9]       Reuters, "Amazon Seen Triumphing Over Apple Privacy Policy Changes in Digital Advertising Business," Gadgets 360 (NDA Venture), 28 October 2021. [Online]. Available: https://gadgets.ndtv.com/apps/news/amazon-apple-privacy-policy-change-advertising-target-user-data-quarterly-earnings-revenue-2590623. [Accessed November 2021].

[10]    S. Ikeda, "Apple Privacy Changes Reflected in Big Tech Earnings Reports," CPO Magazine, 1 November 2021. [Online]. Available: https://www.cpomagazine.com/data-privacy/apple-privacy-changes-reflected-in-big-tech-earnings-reports/. [Accessed November 2021].

[11]    A. Nayeem, "Apple’s New Privacy Updates and How This Affects Marketing for Your eCommerce Store," Push Owl, 28 June 2021. [Online]. Available: https://blog.pushowl.com/apples-new-privacy-updates-and-how-this-affects-marketing-for-your-ecommerce-store/. [Accessed November 2021].




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