Apple released the latest version of its iOS operating system, iOS 15, on September 20, 2021. As with the previous iOS update, the new features devoted to enhancing users’ data privacy will adversely impact the advertising industry.

Companies like Apple and Google are attempting to rebrand themselves as privacy champions through new features as lawmakers take more significant action to curtail the power of Big Tech. Apple, which can require stricter permissions from third parties to handle customers’ data, is in a position to reap the benefits of increased concern around data privacy.

Craig Federighi, Apple’s senior vice president of software engineering, highlighted the company’s ambition for greater data privacy, stating, “Every year, we push ourselves to develop new technology to help users take more control of their data and make informed decisions about whom they share it with.”

On the other hand, ad-funded internet companies like Facebook are badly affected by these features. Following the iOS 15 update, on September 22, Facebook issued a rare mid-quarter update to investors warning about the impact of Apple’s changes. Facebook’s shares fell 4% on the day of this announcement.

The latest Apple privacy features

The iOS 14.5 update introduced the App Tracking Transparency feature, which required users to give explicit permission for an app to track their activity across the internet. The new App Privacy Report rolled out in iOS 15 allows users to view a summary of how apps are collecting their data and using previously granted permissions. Further, Mail Privacy Protection is an optional feature preventing email pixels from collecting user data. The new paid subscription version of iCloud, iCloud+, will also give users access to Private Relay and Hide My Email features. These features will present additional challenges to ad-funded internet companies by preventing them from accessing users’ IP addresses and seeing which emails they have opened and which links they have clicked.

Detrimental repercussions on the advertising industry

Apple had previously received backlash from Facebook CEO Mark Zuckerberg for interfering in how Facebook’s apps work with the App Tracking Transparency feature, which essentially left advertisers using Facebook blind. Privacy updates obscuring the user base of ad-funded companies have proven to be detrimental as ad performance across the online advertising industry has dropped. According to Facebook estimates, it is underreporting iOS web conversions by approximately 15% due to difficulties measuring advertisement campaigns on the platform. Ad performance is typically measured through metrics such as reach, clicks, engagement, and impression.

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Meanwhile, Apple’s own advertising business has grown significantly following the updates, more than tripling its market share. According to Branch, Apple’s in-house advertising business, Search Ads, is now responsible for 58% of all iPhone app downloads that result from clicking on an advert, a significant increase from 17% a year ago.

Nonetheless, it appears that the focus of ad-funded companies has shifted from mere criticism to adapting to this changing landscape. For example, Facebook product marketing VP, Graham Mudd, asserted that Facebook is developing new privacy-enhancing technologies that minimize the amount of personal information processed while still ensuring the effectiveness of personalized ads. The blog post advises advertisers on actions they could take to improve their ad performance.

As companies like Apple and Google continue to obstruct data collection through stringent data privacy measures, reform in the advertising industry will accelerate.