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Apple iOS 14.5 App Tracking Transparency rewires martech

If your business strategy fully relied on iOS tracking for survival, your company was probably in trouble before 14.5 came out this week, marketing experts say.

Apple's iOS 14.5 App Tracking Transparency for mobile devices gives phone and tablet owners more control over data surveillance -- apps tracking behavior in other apps to customize ads. For marketers, that may mean one of their go-to tools has been taken out of the digital toolbox, or at least will be severely blunted.

Apple made its intentions known that it would require app developers to give users a choice to opt in to data tracking across apps late last year. Facebook immediately hit back, claiming that less-targeted Facebook ads would harm small businesses. Small businesses and agencies that cater to them reaffirmed that notion.

Experts said that while less iOS tracking will change how digital marketing is done, it probably won't have a big effect on marketing strategy and technology for many large businesses. That's because in the last two years, marketing teams have worked hard to comply with new consumer privacy laws that lay the groundwork for customer opt-ins on data use.

Google and Apple both plan to eliminate third-party browser cookies, too. Taken together, privacy opt-outs and the slow death of third-party cookies either already have or will in the very near future dilute the value of data gleaned from digital ads.

"If marketers were really being honest about why we're freaking out about this -- and why Facebook is freaking out about this -- it's because shady behavior begets shadier action, and we've been doing it since the dawn of time," said Liz Miller, an analyst at Constellation Research. "The losers in this situation are companies who look at giving customers control of their own data as a bad thing."

Who will opt out?

Apple turned on iOS 14.5 App Tracking Transparency this week, which manifests as a pop-up window in apps. Some developers, however, turned on the features earlier in preparation of iOS 14.5. AppsFlyer, which manages mobile attribution of digital ads -- keeping track of what ads drive what activity -- analyzed 13 million consumer answers to data-tracking prompts among about 300-plus apps hosted by these early adopters during a three-week period before iOS 14.5 went live.

AppsFlyer found that people opted in for ad targeting approximately 41% of the time. Half the apps had at least 32% opt-in rates. But there was a difference in the kinds of apps people said "yes" to, said Shani Rosenfelder, head of content and mobile insights at AppsFlyer. The more well-known and trusted a brand was, such as in the utilities, shopping or social arenas, opt-in rates tended to be higher.

Brands that had less of a connection to their users, such as game developers, saw lower opt-in rates. Only the largest, most well-known game developers saw opt-in rates comparable with non-game apps. Brands that app users have done business with in the past, such as shopping apps, tend to be more trusted when the opt-in window pops up.

iOS 14.5 Software Update
Apple mobile device users get App Tracking Transparency in the iOS update released this week.

"Things may change, but we are cautiously optimistic that opt-in rates will be higher than anticipated for marketers and for users," Rosenfelder said. "It remains to be seen what the real opt-in rate will be."

To persuade app users to opt in to ad tracking, AppsFlyer found that three messages Apple allows developers to put in the App Tracking Transparency pop-up may effectively drive positive results: Opting in helps the app to remain free, opting in helps show users content that is relevant to them and "we prohibit the use of your data for any purpose other than providing you with relevant experiences."

AppsFlyer notes that Apple prohibits the use of discounts or other offers to induce users to opt into iOS data tracking across apps.

Marketing strategies will change

In anticipation of a drop-off in cross-app tracking data, agencies and consultants who work with marketers have been developing strategies to replace it. The companies that are panicking now are the ones that put off planning for App Tracking Transparency during pandemic disruptions, said Zach Baze, chief intelligence officer at Hawkeye, a digital agency that runs Epsilon adtech as well as first-party data platforms.

The hardest-hit marketers will be those that built businesses on mobile advertising or hyper-targeted ads, and they will have to adjust to survive, Baze said. For small businesses, those ads were cost-efficient. For most companies, though, the loss of cross-app data will reinvigorate the creativity that precision advertising tools made obsolete, and they probably have at least gotten started on cleaning up their first-party data on the customers they already have.

Apple's iOS moves, in tandem with Google eliminating third-party cookies by next year, will force companies to use that first-party customer data to drive better customer experiences, instead of outsourcing tracking to Facebook and its competitors.

Apple iOS tracking
Tracking via iOS can still happen as it did before -- but in version 14.5, Apple forces developers to explain themselves to iPad and iPhone users.

"Responsible marketers have seen this coming; it's part of a tidal wave of a cookie-less future, and it's probably a part of a market correction," Baze said. "Apple is a lifestyle brand, not a data company, so it is diametrically at odds with Google or Facebook. Apple is just looking out for the experience of the consumers that they market to -- which is what marketers should have been doing all along."

Facebook, in a blog post, said small businesses will be adversely affected by the iOS tracking changes. Consultant Athan Slotkin, who works with small businesses and entrepreneurial startups on marketing and business planning, said companies that offer specialized products and sell exclusively online will be hardest hit.

Many small companies, he said, start and end their advertising plans with Facebook and Instagram. Sometimes they aren't even aware of targeting tools those platforms run to lower costs and more precisely find customers more likely to be interested in what they're selling.

Slotkin said he advises clients to diversify investment over different online channels, whether it's straight SEO, TikTok, Clubhouse or other ad platforms. New and emerging social platforms typically offer more organic reach, he said, so they may represent better returns for cash-strapped small businesses. More than that, though, Slotkin advises businesses to collect and invest in their own customer data.

Get their email address, and don't just get their consent, because that feels a little like it's under duress. Get them enthused to share their email address because they're interested in hearing from you and they value what you do.
Athan SlotkinSmall business consultant

"Part of my thought process -- even before all this happened -- is the value of owning the customer relationship and communicating with them directly," Slotkin said. "Get their email address, and don't just get their consent, because that feels a little like it's under duress. Get them enthused to share their email address because they're interested in hearing from you and they value what you do."

CDPs move up in priority

The customer data platform (CDP) is one way to activate first-party data a company owns for marketing purposes. As Apple, Google and privacy-minded legislators put more control over data surveillance into the hands of consumers, CDPs may provide new paths for marketers to reach customers.

Many companies have mixed-vendor stacks for CRM, marketing automation, e-commerce and customer service. CDPs function as a customer data traffic manager to update marketing efforts in real time as customers buy things, browse, call customer service and fill out surveys. In turn, marketing tools can send offers to those customers or add them to campaigns as they reveal more about their preferences and needs.

For their part, CDP vendors are watching how interactions between companies and their customers will be governed by future privacy laws and those already on the books. BlueConic, a CDP vendor, strives to build flexibility into its data management features to anticipate scenarios that go much further than iOS 14.5.

"We need to be looking at the potential that every interaction with a customer will need to be consented -- at the moment of interaction," said Cory Munchbach, COO of BlueConic. "We play that out all the way -- every time you come to a website or every time you come in-store, you, as a brand, have to earn the right for the customer to authenticate who they are and give you that identity. That raises the bar on customer experience."

Optimizely, formerly Episerver, acquired the Zaius CDP last month. Peter Yeung, CIO and general counsel at Optimizely, agrees that companies that are more transparent about their customer data use will be better off in the long run.

As for App Tracking Transparency, Yeung said he feels that Apple is playing catch-up in a marketplace where consumers feel increasingly insecure about data breaches. Apple, he added, also probably wants to distance itself from Facebook and its subsidiary WhatsApp, whose data-tracking methods are under Federal Trade Commission scrutiny.

Yet iOS 14.5 gives a "romanticized vision" of choice to consumers, he said. It sounds good. But anyone who has tried to opt out of data tracking in apps then looks at their Gmail to see what is left, for example, realizes just how convenient personalized notifications and tailored emails are for things like keeping in touch with friends.

It's great that technology companies are empowering individuals to choose to whom they give their data, Yeung said. Consent will become the product roadmap bedrock for many digital marketing vendors. But personalization is still in early stages, and the experiences will at first have much room for improvement.

"I don't believe it's the end of personalization," Yeung said. "What you'll find is that technology companies will find ways to become more and more clever in terms of how to create a personalized experience without identifying you as an individual, building a profile of an anonymous user that they kind of, sort of know what they look like or their activities are, but they can't identify as an individual."

Hawkeye's Baze said that CDPs might become the tool that saves personalization, taking it to heights that cross-app tracking never could as marketers begin to use more of their features and integrate them more fully into their tech stacks. But CDP users must first get their data in order before they can effectively deploy those features. His company's third-party data will enhance the insights that first-party data reveals, he said.

"First-party data is the best data; it's the most actionable," Baze said. "But a lot of CTOs have spent a lot of money on data infrastructure the last five to eight years. What they're finding out is that the data that's in those is incomplete, badly organized, its hygiene is not good, and it's not that hardworking."

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