The DeanBeat: What’s at stake in Apple’s potentially apocalyptic IDFA changes

The Identifier for Advertisers, also known as IDFA, seems like an unlikely candidate for causing an apocalypse in mobile games, advertising, and the iPhone ecosystem. But the obscure tracking technology, which anonymously profiles a user, seems like Death riding in on a pale horse.

Starting in June, Apple caused a stir by saying it was effectively getting rid of the IDFA, making it harder for advertisers to target consumers with ads. Apple’s plan was to enhance privacy, but it caused a great stir among the likes of Facebook, mobile marketers, and their customers such as game developers. Apple did this without widespread consultation with the app and game industry.

By getting rid of the IDFA, Apple could make its platform more attractive to those who value privacy, consistent with the latest privacy-marketing ads for its iPhones and iPad. But the uproar from Apple’s partners forced Apple to delay its move from mid-September, with the release of iOS 14, to sometime in early 2021.

A lot of mobile game companies and marketing firms felt like it was a stay of execution. The stay came just as Brian Bowman, CEO of mobile user acquisition firm Consumer Acquisition, warned that the IDFA change could result in thousands of layoffs at the mobile-app advertising ecosystem, including game companies, mobile ad measurement firms, mobile marketing, user acquisition, and ad networks.

“You ever see the movie The Green Mile?” said Bowman. “We’re walking to death row. The phone rings. We walk back. That’s all this is. In five months, we do the walk again. I think the thing that was most shocking to me was how few people were willing to talk to the press about the topic. It was clear that there’s the fear of retribution in the industry, that your next title may not be featured.”

I’ve been interviewing leaders in the ecosystem about what happened and why Apple went down this road, and what the solution could be. Clearly, some kind of compromise is necessary. It’s a tradeoff between effective performance advertising and user privacy. On privacy, the question is whether Apple can trust its third-party partners — and competitors — not to share user data inappropriately.

“We work with probably 90 of the top hundred games in the world,” said Abhay Singhal, the CEO of mobile ad firm InMobi. “Everyone has wondered why Apple wasn’t a bit more open. I don’t think Apple would immediately take down the monetization ability of its developers by 40%. It’s hard to believe. I hope they’ve pulled this back indefinitely.”

We can say good riddance to targeted ads. But the reality is that advertising is key to success for many games and apps, and if advertising disappears or becomes less effective, consumers will no longer get a lot of things for free.

Even Facebook criticized Apple’s position on the IDFA, saying the loss of personalized ads could hurt developer revenues by 50%, in a rare but increasingly common sign of disagreement between the tech giants. During the pandemic, both of these problems — falling developer revenue and consumers not getting as much for free — couldn’t come at a worse time.

Eric Seufert, a user-acquisition and monetization expert and owner of Mobile Dev Memo, said in an interview that he believed that Apple had to delay the IDFA change because disaster was looming.

“There were no advertisers ready for this. It would have been total pandemonium,” Seufert said. “People had to update their apps to accommodate all this, and none of the measurement partners were ready. So they were going to have buggy software that they were going to push out the door at the last minute, and that could have led to apps breaking. I think the big fear on Apple’s part was that all your favorite apps were going to break, which is a horrible experience.”

Why it matters

Above: “The Green Mile” captures the Apple-IDFA situation well.

Image Credit: Warner Bros.

There’s a big question about why should we care about the IDFA? It feels like it’s important only to ad geeks. But it’s bigger than that.

How much money is at stake? Let’s say that Singhal’s guess of about a 40% drop is right. Based on numbers shared in the Apple-Epic antitrust lawsuit, the developer share of iPhone revenues last year was $38.7 billion. If you take that down by 40% because mobile marketing is no longer effective, that’s a loss of $15.5 billion. Apple’s own cut will go down by $6.6 billion. That’s a pretty big self-inflicted wound by Apple. That number is most certainly off-base for 2020, but it tells you the magnitude of the stakes involved with IDFA.

The IDFA issue is about the effectiveness of advertising. If you cripple it, you cripple the ability for advertising to be targeted. On the other hand is privacy. If you’ve seen the Netflix documentary The Social Dilemma, you’ll know there’s a lot at stake, even the state of global democracy itself.

If we compare mobile ads to TV ads, we can understand the issue better. With TV ads, brands create an impression in a user’s mind about a product. Nielsen measures this by polling users about what they thought about products. The advertiser would know their advertising was working when Nielsen verified the user was aware of the product.

With mobile ads, the result has been more precise. You can target an individual user with an ad based on that user’s history. If the user takes an action, like downloading an app or paying for something inside one, then the ad worked. The advertiser gets paid. If it didn’t work, the advertiser isn’t paid. That’s called performance advertising. With the change that Apple is proposing, we’re leaving performance advertising behind and going back to the world of Nielsen and brand advertising.

“It is a fundamental tectonic shift,” said Bowman of Consumer Acquisition. “Apple is taking a fairly aggressive stance in which all downloads, all user profiling, all targeting will be owned by Apple.”

While some are fighting this change, others say the writing is on the wall.

“The beauty of advertising is it’s an imperfect science. And it always has been,” said Matt Barash, a senior vice president at AdColony, said in an interview with GamesBeat. “And I think that the closer you get to perfection, the more concerning it becomes. You’re violating some principle of privacy. There are many who believe it should be perfect. But I think you have to be OK with the fact that it’s never going to be 100% certain. It’s almost a step back from perfection.”


To Singhal, the result of the IDFA change is simple. Go to YouTube and log into your account. When you view a video, you will see a bunch of related videos. The recommendations will be pretty good because YouTube, owned by Google, has honed how it reads your tea leaves and your intentions and it has figured out the best way to keep you engaged and clicking on more videos.

But you can go to a setting that turns off a key feature that has to do with privacy. If you turn off the feature that says “customize the video view on the basis of my history,” the relevancy changes. If you do that, YouTube can’t use your past data to serve you recommendations. You’ll start seeing random videos that are just total guesses about your interests. Instead of being targeted with videos that you’ll like, you’ll be spammed.

“You would actually see your own video consumption reducing because what will happen is the video that comes on your YouTube screen will actually start becoming less and less relevant,” Singhal said in an interview with GamesBeat. “And when they become less and less relevant, you would actually not be viewing them at all.”

By retiring the IDFA, Apple effectively did this, Singhal said.

“This is a live experiment that one can do to realize what a lack of relevance does with advertising,” Singhal said.

Seufert, the user-acquisition expert, added, “The relevance of ads is going to go way down. But people don’t recognize the value of relevant ads.”

Why would Apple do this?

Above: This would include Apple Watch apps, too.

Image Credit: Apple

The big question is why would Apple do this? It shot itself and its partners in the foot, critics believe. It was willing to make advertising less efficient for game developers, the lifeblood of the App Store, the companies that generate revenue for themselves, the advertising ecosystem, and Apple itself.

I’ve characterized Apple as an industry elephant that is in danger of stomping on the mice: game developers. Barash at AdColony said that he was surprised that Apple put off the IDFA retirement.

“It’s Apple’s world, and we’re living in it,” said Barash. “There is a bit of obedience and respect that the developer community has to show in deference to Apple. It was a bold step from Epic Games [to sue Apple], and it was a step in the right direction from Facebook” [speaking up and criticizing Apple].

Apple reported $146.4 billion in iPhone sales and $20.5 billion in iPad sales, for a total of $166.9 billion, or 91% of Apple’s iOS-related revenue. In January, Apple reported it had paid out $155 billion to developers since the launch of the App Store in 2008, with a quarter of that $155 billion, or $38.8 billion, paid in 2019. Assuming a 30/70 revenue split between Apple and the developers, this would imply revenues for Apple of $16.6 billion in 2019. In other words, Apple doesn’t really care about this revenue. It’s not huge by comparison. But Apple would rather have revenue generated by in-app purchases, where it takes a 30% fee, than the revenue generated by advertising, where it doesn’t get a cut, Singhal said.

Apple didn’t comment for my story. But this is where I get to Apple’s intentions. Apple has pledged itself to privacy, something that distinguishes its stance from other tech giants like Amazon, Facebook, and Google. By retiring the IDFA, it was getting rid of the advertising cookie, and failing to replace it with something better.

Perhaps this is on purpose?

How much privacy do we need?

The data that the advertisers were using was anonymous, meaning the IDFA was not attached to anyone’s name. How was that an invasion of privacy?

“My personal speculation is that Tim Cook wants his legacy to be a private ecosystem,” Singhal said. “The IDFA is not your personal email. It’s some digits that are your digital identity in the mobile ecosystem. That has no relevance to your real identity. But large companies have joined these digital identities with physical identities and made them one and the same.”

Regulators for privacy actually do care about both scenarios. They worry what happens when an advertiser has your real name, and they also worry when an advertiser doesn’t have your real name but knows everything about you, including which device you are using.

Apple hasn’t explained its stance. But it does have cred when it comes to privacy. Apple will modify App Store product pages by providing users an easy-to-view summary of developers’ self-reported privacy practices later this year. Apple will give users the ability to share only approximate locations with apps.

A recording indicator will also alert users when an app has access to the device’s camera or mic. It has new photo library protections, clipboard access transparency, and new access controls for devices in the home and on other local networks. Apple has had to do these things because others have been caught violating privacy via these above-mentioned means.

Outside the walled garden

Above: Apple CEO Tim Cook speaking at Steve Jobs Theater.

Image Credit: Screenshot

Singhal believes that Apple looked outside the walls of its own corporation and found things that were disturbing. While Apple monetized through the sale of its devices and its 30% share of apps and games sold on its devices, the other tech giants monetize in a different way.

In a public statement about the IDFA delay, Apple said, “We believe technology should protect users’ fundamental right to privacy, and that means giving users tools to understand which apps and websites may be sharing their data with other companies for advertising or advertising measurement purposes, as well as the tools to revoke permission for this tracking. When enabled, a system prompt will give users the ability to allow or reject that tracking on an app-by-app basis. We want to give developers the time they need to make the necessary changes, and as a result, the requirement to use this tracking permission will go into effect early next year.”

While Apple can argue that it is looking out for consumers here, it faces scrutiny of its own for its behavior in how it runs its App Store. Epic Games has sued it for antitrust violations, and Congress is reviewing Apple’s behavior as well as that of the other tech giants.

Both Google and Facebook, for instance, monetize by knowing everything about you and selling advertising on the basis of what you like. Amazon monetizes through knowing everything about what you buy and serving you more of that. They all know who you are, and they have all been accused in some way breaking rules about collecting more information about users than they should.

Google learned our real identities through Gmail, and Facebook has always used real identities for its users. They both can serve us far more targeted advertising because they know who we are and what we like through years of interaction with everything online. Apple doesn’t like this, and it has made that clear in the messages that Tim Cook has delivered and in its own advertising. If Congress is thinking about regulating the tech giants in some way, the privacy-invasive practices of Google, Facebook, and Amazon are one of the main reasons for doing so. And Apple would be happy if Congress reined those companies in when it comes to privacy.

Europe has already put such regulations in place such as the General Data Protection Regulation, which restricts the use of personal data in the European Union. With a lot of talk about privacy regulation in the U.S. and elsewhere, Apple saw the writing on the wall.

Since Apple never really created much of its own mobile marketing ecosystem (it does have its own Search Ads business, as we’ll talk about later), a bunch of third-party mobile advertising, marketing, and measurement firms did. These companies do everything from measure the results of ads to automating the process of creating ads targeted at the right people. All of it took place outside of Apple’s walled garden.

Through the IDFA and its predecessor, Apple effectively allowed tracking to happen on an anonymous basis. If I bought a strategy game and paid for something inside it to optimize my experience in response to an ad, then the advertiser would learn that about me, even if it didn’t know who I was, through a third-party measurement firm. I was just a number to them. But they would track that number and know that they could target me with strategy game ads and pass that on to the mobile marketing firms, who could work with strategy game makers to create advertisements that would target me.

This system worked well for a long time. But as the concerns about privacy rose, Apple worried that when this anonymized data fell into the hands of Google and Facebook, they could match it with their own data about what they knew about real people. They could correlate this anonymous data about users and their own data and figure out what I, Dean Takahashi, was buying. And Apple worries that Google and Facebook, who make a living on knowing what I do, could use that information to further invade my privacy. They could know where I was and what I was doing and use that info.

Regulators, particularly in Europe, have also expressed concern about both personalized tracking with real names and personalized tracking without real names.

Of course, the irony here is that Apple — through the navigation signal on my phone, my registration of my phone, my purchases, my clicks, and other data — also knows exactly where I am and who I am. So while Apple doesn’t like the third-party collection of cross-app data for advertising purposes, it doesn’t necessarily believe that collection of cross-app data inside its walls itself is wrong.

Increasing privacy regulation

Above: CEO Mark Zuckerberg talks privacy — but does Facebook practice what he preaches?

Image Credit: VentureBeat

Apple has never come out and said this, but it may be why it’s so concerned about IDFA, which is effectively an advertising cookie.

“These things were a long time coming,” said N3twork chief operating officer Dan Barnes in an interview with GamesBeat. “This comes from GDPR in 2018 and CCPA [California’s privacy law, the California Consumer Privacy Act] in January [as well as the related Proposition 24 privacy law upgrade on California’s ballot in November]. All of this stems from much-needed privacy regulations. They’re built not just user-level data, but the way people share user-level data. It’s about how you share that data with third-party advertisers or developers.”

Apple was OK with developers knowing what they knew about their own users. It had a problem with whether that data on users could be shared with anyone. Of course, something else may be at play. Apple may simply want to move into competition with Facebook and Google — and hobble them at the same time.

“If you look at who controls app store distribution now, it’s Facebook and Google, through their app platforms. And I think Apple wanted to just take that back. It’s common knowledge that Apple doesn’t like free-to-play gaming,” said Seufert. “They definitely don’t like hypercasual gaming. And you see those apps dominating the app stores. How? Because they advertise. Facebook and Google allow for those apps to become the dominant gameplay mechanics.”

He added, “If you hurt Facebook and Google’s ability to handle distribution at scale, then Apple becomes the primary gatekeeper and kingmaker again, like in 2012 and 2013. Apple’s featuring becomes important again. There’s more than just privacy as the motivation from Apple’s point of view. If you make ads 50% as efficient, the demand for games doesn’t go away. What Facebook and Google do is they prevent anyone from ever having to do organic search. Maybe Apple loses a little bit of revenue [from the lost advertising power].”

Seufert continued, “But people will still play games and spend money, and Apple will get a cut of that, and it will gain market share with its own ad network. From a revenue perspective, I don’t think Apple is going to lose anything.”

It’s worth pointing out that on Android, Google hasn’t made any moves yet to do what Apple is doing. But ultimately, Android will be under the same privacy pressures as Apple is dealing with. Still, iOS is more important for games, and two-thirds of the profits of the mobile industry are on Apple’s platform.

Google is dependent on ads, but it may still have to change how it handles advertising. As an example, it’s getting rid of cookies in its Chrome browser. But it is consulting with the ecosystem and doing it with a two-year warning.

To comply with current and future privacy regulations, one of Apple’s reactions to Facebook and Google is to bring more control of the ecosystem within Apple’s own internal operations. That’s not necessarily a good byproduct for the industry.

“Every regulation has given license to these walled gardens to raise the walls even higher,” Singhal at InMobi said.

How the IDFA will die

Above: The hot mobile games

Image Credit: Sensor Tower

Here’s another thing to know. Apple didn’t kill IDFA outright. Rather, it simply gave users an option to opt-out of it. Before, this option was hidden. But with iOS 14, the new operating system for iPhones and iPads, Apple made a change where the opt-in question was prominent. It asked you outright, before any tracking happened, if you wanted to be tracked for advertising purposes.

Because the question was worded that way, most observers predicted that no more than 20% of users would opt-in. After all, who wants to be tracked? But if Apple said that you would have to pay $300 or $400 a year for the things you’ll be getting for free if you accept tracking, then the opt-in results would probably be different, Singhal said.

Developers wondered if they could incentivize the users to opt-in. But Apple closed that loophole on September 11, saying, “Apps cannot require users to rate an app or review an app or watch videos or download other apps tap on ads enabled tracking or take other similar actions in order to proceed with the app.”

Of course, it may be that Apple doesn’t necessarily like developers making money from advertising, as it can’t collect a 30% fee on things that consumers receive for free in exchange for watching ads that generate revenue for developers. Without effective advertising, then consumers just have to pay for things, and Apple can take a 30% cut on that. That’s a bit of a conspiracy theory, but you never know why a corporation is motivated to do something.

Pushback from Facebook and others

Apple CEO Tim Cook compared to Amazon CEO Jeff Bezos, Facebook CEO Mark Zuckerberg, and Google CEO Sundar Pichai testify virtually on Webex.

Above: Apple CEO Tim Cook compared to Amazon CEO Jeff Bezos, Facebook CEO Mark Zuckerberg, and Google CEO Sundar Pichai testify virtually to Congress.

Facebook came out and criticized the IDFA retirement. In testing, Facebook said it saw a 50% drop in Facebook Audience Network revenue for publishers when personalization was removed from mobile ad install campaigns.

As noted, Apple didn’t care so much about this part, as it felt like Facebook was too invasive when it came to privacy. But it did care about totally wrecking the game and app industry, which are key to why Apple’s products are so attractive to consumers.

Apple had planned to partially replace the functionality of the IDFA with its SKAd Network, which had more limited measurement of user activities (it wasn’t measured in real time, only once a day later) and it did not provide user-level data. Apple would still let developers track 64 attributes about their users. But it would limit how much detailed experimentation could be done with campaigns. If there is some benefit, it’s that ad fraud would likely disappear under this scenario.

Rather than fire a shotgun with lots of different advertising variations and then know exactly which of those pellets struck home, the advertisers would only get a few rifle shots in and hope that they worked. That involves more guesswork and a lot less science, said Barnes at N3twork.

Instead of having the mobile measurement companies handle this data, Apple will handle the task of measuring the results of advertisements itself, bringing in a lot of the functions handled by the mobile ecosystem. That essentially swept the legs out from under the mobile measurement companies like AppsFlyer, Adjust, Singular, and others, Barash said. And, in the name of privacy, Apple’s measurements of advertising success will be fairly vague.

“One of the things that’s unclear is, ‘Can a third-party SDK even be in an app? As it is written, no. So that means mobile measurement partners can’t be in it,” Bowman said. “Apple needs to increase the time window for when they report data back. Right now, it’s 24 hours. Most of the industry is wired on day seven, ultimately extending that out to 30 days. You’re running tens of thousands of dollars or hundreds of thousands of dollars in ad spend, and you are flying blind. It’s not viable. The entire ecosystem we have evolved over 10 or 15 years is going to be rolled backward. In my view, the SKAd Network is a half-baked product.”

Seufert, the user-acquisition expert, agreed. But fixing the SKAd Network isn’t an easy matter when you’re balancing privacy concerns. Apple’s Search Ads business is growing and could become much bigger over time, at the expense of Google and Facebook.

That business is growing, and Search Ads as a business is likely to benefit while Google and Facebook are likely to suffer when the IDFA is gone. Apple has a mechanism where you can opt out of sharing data for those Apple ads, but it is harder to find that then it is to find the IDFA opt-out setting.

And yet Seufert doesn’t think the failure to replace the IDFA with something good is going to cause a total meltdown.

“The obfuscation is the privacy protection,” he said. “It prevents people from doing any user-level tracking. There are limitations but you can get around them. That’s my point. People exaggerate how bad this is going to be. A lot of [user acquisition] teams are overly dependent on the transparency that they think that the attribution companies provide. People complain about the limitations of the SKAd Network. It’s a lack of imagination. You have to be able to build the tools that make it performant. You can’t just rely upon third-party tools.”

What comes next

Apple's World Trade Center store.

Above: Selling hardware in its stores is key to Apple’s existence.

Image Credit: Apple

The communication hasn’t happened to give Bowman confidence about where things stand. How much time does the industry have? Bowman said that he thinks it’s maybe January before the bulk of the iOS population adopts iOS 14.

“Relevance is going to drop off a cliff. It’s a rethinking of the efficiency with which all media is purchased. And SKAd Network is at this moment not a viable long-term solution,” Bowman said. “If you opt-out, spam is the absolute best word. We’re going to roll back 15 years of targeting of ads that are relevant. It’s like watching TV advertising. All of a sudden, what comes is what you get.”

Seufert believes that Facebook will have to communicate how it will use the SKAd Network’s limited capabilities and then communicate that to the rest of the food chain.

In this whole scenario, by keeping control of the data shared, Apple could stop the flow of data to the likes of Google and Facebook. That could hobble some of Apple’s rivals, but it also hurt Apple’s own partners as well as brand advertisers.

The problem is that when the IDFA changes go into effect in early 2021, there still isn’t an effective system to replace it. Targeted advertising could evaporate, and we might get hit with nothing but spam. Ads will be less effective, and ad rates will fall. That’s good. But who is going to pay for worthless ads?

“What we are saying is privacy is important,” said Sergio Serra, a senior product manager at InMobi, in an interview with GamesBeat. “But let’s find a way that doesn’t destroy the ecosystem. I mean, you can’t expect that in three months, the system will be able to, you know, react and retain the current status quo. The SKAd Network is absolutely unusable.”

Why wasn’t Apple more prepared?

App Store

Above: Could Apple have handled this better?

Image Credit: Apple

“That’s the $100 billion question,” Singhal said.

The replacement could be some kind of compromise, worked out between Apple and its mobile ecosystem and the game and app developers. It matters to all of us because we often don’t realize what good targeted advertising gets us.

For one thing, we get lower prices when we view advertising. It’s a source of revenue, so app and game makers don’t have to charge high prices for their wares. If we view an ad in a game and make a purchase on it, that supports the free-to-play business model. The developer can afford to give us a game for free because it knows that some of us will view an ad and make a purchase inside the game based on that viewing. That revenue, shared with Apple, the mobile marketers, and the game company, is enough to support the whole ecosystem.

Advertising lowers the prices that we pay for services. It’s why Facebook and Google offer things for free to us, because they capture our data and share it and then make money from it. If we opt to stop sharing our data, we protect our privacy, but we also miss out on advertising deals, paying higher prices as a result.

To hammer this point home, Apple benefits when there isn’t a strong advertising ecosystem. Sure, it has Search Ads. But it makes the bulk of its revenue through its 30% fee of in-app purchases. When a game developer can’t monetize through ads, then it has to monetize through in-app purchases or subscriptions or flat sales of games. Apple takes a cut, whereas it takes no cut on advertising revenue.

Surely there’s a compromise between advertising and privacy?

One compromise is to change the language of the opt-out. Rather than just ask if you don’t want to be tracked, the mobile marketers want the question posed as a value exchange, Serra said. They would ask if you would want to be tracked if it means you can benefit from targeted advertising deals. Another way is to ask the question when you are inside an app that you enjoy, where it would clearly spell out that you could get special deals inside that app if you agree to be tracked.

When Apple revealed its reprieve, Barash welcomed it as offering business continuity through the end of the year for his industry, and he saw it as a way for developers to balance advertising with better user privacy. If Apple had allowed the change to happen and the layoffs to proceed, it could have been a “public relations disaster,” Barash said. And, given the scrutiny of the government now, that would have been bad timing for Apple.

Right now, Barash isn’t optimistic that a compromise will happen.

“If you’re giving me more relevant Twitter timeline or a more relevant gaming experience based on my location, there’s a use case there, like Pokémon Go,” Barash said. “When it comes to monetization, there is a tradeoff. For programmatic advertising, knowledge has always been power. Apple was really trying to turn the model upside down. It represents a shift in thinking for the consumer to have transparency. That was scary for developers. They may have to rethink monetization. They have 90 days to get that done and reinvent an industry.

“That’s an awfully quick turnaround.”

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