What is Apple really up to?
Apple is being profoundly hypocritical, will regulators catch on? (Part 3)
This is Part 3, Part 1, Part 2 and Part 4.
Digital Advertising guru Eric Seufert is rightly worried it “will take regulators years to discover what Apple has accomplished with ATT: wresting advertising market share away from Facebook while using proprietary — because it owns the App Store!—install/revenue data to target ads for its ad network.”
Let’s take a quick step back and recap. Apple launched its Search Ads inside the App Store in 2016, soon after shutting its failed iAd advertising product. Apple reports this revenue under the new category of “Services” (It does not break out the advertising component that includes subscription revenues for things like News and iCloud.)
And this Services revenue matters. Hardware sales growth was slowing (no surprises here, it is massive already). But this new category kept growing at double-digit rates. In Q1 2020 for example, hardware sales slightly dipped, but Services grew at 22%. More importantly, making up 38% of Apple’s gross margin.
Then in April of 2020, Apple updated its Apple Search Ads campaign management API to add new parameters —supplySource and adChannelType. Back then Eric Seufert correctly guessed that these parameters point to the fact that Apple would extend the search ads into some of the other parts of its services. And soon enough Search Ads were spotted in Apple News.
And yes, if by now you are thinking this all sounds hypocritical coming from a company preaching privacy, then you are right. It is profoundly so. Seufert again: “Apple’s proprietary ad targeting—which the company insists isn’t “tracking,” because all data used is first-party—segments users based on the apps they download and the IAPs they make in those apps. It just so happens that Apple’s 1p data is pretty helpful for segmentation.”
And what is this Apple first-party data Eric is referring to? It is this
Notice, it includes location. And…
It is this talk of “first party” data that also inoculates the other big platforms from Apple’s ATT measures inside their own “Content Fortresses” - the “On platform” play that means smaller publishers, and Open advertising will suffer most.
This combined with Apple’s ATT exception that data can be shared between Apps that belong to the same entity is what is causing consolidation in the digital industry, as I will explain in my next post Part 4.
Apple has muddied the water. Regulators would be loath to intervene before the mud settles. It has made regulatory interventions harder —yet never has it been more necessary.