What Apple's iPhone update means for the ad industry - AdAge.com

Apple’s next iPhone software, iOS 15, promises to curtail data-sharing even more than iOS 14, putting a new scare in the advertising industry about the future of digital ads in the world of Apple devices. Apple is instituting a number of new privacy measures that wall off its users from prying eyes, especially internet ad companies that live on device data to target and measure ads.

Meanwhile, in place of the old methods of advertising, many advertisers say Apple could become a resurgent player, developing its own version of personalized ads to fill the gap and help apps and publishers make money in the process.

On Monday, Apple will release iOS 15, which runs on iPhones, as well as companion software for Macs, iPads and Apple Watch. This comes just as advertisers are only starting to adjust to iOS 14’s release last year, when Apple implemented “App Tracking Transparency,” which lets users opt-out of tracking. With the update, if a consumer declines to be tracked, then an app can not utilize device data that in the past was used to improve services and run personalized ads.

Now, iOS 15 promises to restrict tracking even further, shutting off the ability for developers, publishers and advertisers to see the internet protocol addresses of Apple users browsing on Safari—a practice known as “IP masking.” There’s also a new way for Apple users to hide their email addresses so marketers can’t see when a consumer opened their emails.

“Private Relay” is another component to Apple’s next-generation software, which encrypts the web browsing tracks of iCloud customers.

The full ramifications of all these privacy initiatives are not yet known, because they depend on how often consumers opt into the tools. But what’s clear is that Apple’s moves represent yet another disruption to the ad tech marketplace.

Apple’s new software is expected to impact the internet and mobile web, whereas iOS 14 was geared toward app privacy, says Jess Simpson, senior VP, verified tech and identity, Publicis Media. With iOS 14, Apple cut off the ability for developers and ad tech companies to use Apple’s Identifier for Advertisers, or IDFA, which is a unique code that makes it simple to record every step of someone’s journey on the iPhone. Without IDFA, ad tech companies have relied on reading IP addresses to target consumers.

“The big thing [in iOS 15] is around Safari,” Simpson says. “Previously, it was IDFA opt-in and now it’s really focused on IP addresses, which a lot of folks are using as cookie replacements.”

“Behavioral targeting, geolocation targeting, cross-device identity, all that stuff is going to be impacted by the further regulation that Apple is imposing within Safari,” she adds.

In June, Apple showed off the new features in iOS 15, but the software rolls out Monday, and comes just as iPhone 13, Macs, iPads and watches go on sale. With every new device and software update, Apple’s ecosystem becomes more guarded about sharing data. Apple wants to upend how digital advertising companies, especially the big internet companies like Google and Facebook, track users through its hardware. There also is a major public push among regulators and political leaders to enforce new privacy measures that prevent companies from sharing data without the express consent of the consumer.

“What Apple has done, not just with iOS, but their entire ecosystem has become this fortress,” says Nirish Parsad, privacy lead and marketing technologist at Tinuiti, a performance marketing technology agency.

Apple, which is publicly averse to advertising, has actually been taking on a new role to fill the holes it left in ad markets. Apple has developed its SKAdNetwork and other measurement services that give advertisers some insights into when iPhone users download apps and other activity. This year, Apple also launched search ads, which is its first-party ad network for brands to target people that are perusing the App Store. Brands like Peloton, Bumble and Wayfair have run Apple search ad campaigns this year.

In the past, Apple has not had success in advertising, and in 2016 it shut down iAd, a network that served display ads. One of the reasons it shut down iAd was because it could not compete with major internet players like Facebook and Google in terms of data and targeting, but the playing field appears to be leveling. Ad industry insiders predict a return of iAd or some similar platform that could provide ad services. Apple currently has dozens of job openings for “ad platforms” specialists and engineers, according to its online jobs board.

Apple did not return requests for comment for this story. But advertisers believe the more Apple shuts off data to outsiders, the more it will be compelled to enter the advertising void.

In August, Amit Daryanani, an analyst at research firm Evercore, issued a forecast that Apple could hit $20 billion in ad revenue by 2025, a growth rate that would mirror Amazon’s transformation into an ad giant over the past three years.

“I don’t think Apple is anti-ads, I think Apple is pro-privacy,” says one advertising agency executive, who spoke on the condition of anonymity. “I actually believe that Apple is leading a push to shift the entire advertising stack to your device, which would effectively allow them to be the gatekeeper for their ad network.”

A lot of ad tech companies are moving the action to the device, keeping the data that is needed to target ads localized to a person’s phone or computer. The data never leaves, which potentially solves the issue about sharing data with outside companies. Facebook and Google are both working on similar technology. Facebook calls it “privacy-enhanced technology.”

“Apple would be the intermediary for targeted advertising on all iOS devices,” the advertising executive says. “iAd is definitely going to be coming back. They have search ads now, and we buy ads on it all the time and we can also buy advertising on Apple TV.”

“They’re laying the foundation for a more robust first-party ads offering,” says another agency exec, also speaking on condition of anonymity.

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