What’s Next for Netflix?

What’s Next for Netflix?

Connected TV

Remember when Meta shocked the world by announcing a historic drop in its stock price? Well, Meta has some company now that Netflix realized a massive drop in its own market capitalization after announcing that the streaming service had lost subscribers for the first time in 10 years. The news shook investors, but it also inspired speculation about new directions for Netflix – notably the likely introduction of advertising, a move that Netflix has resisted for years. But times have changed, and now Netflix must adapt or die. Here’s what I think will happen next:

  • Advertising will happen sooner than you think. Netflix said it will take a few years to integrate ads into the platform. But I’m thinking it will take months. The company has endured two consecutive disastrous quarters and forecast another bad one on the way. Netflix is under too much pressure to wait two years. Plus, its audience is receptive: two-thirds of connected TV viewers in the U.S. prefer to see ads if they can pay less for the service, according to a recent survey conducted by DeepIntent and LG Ads Solutions. On top of that, Netflix is already set up to create an ad business. The company is sitting on top of deep first-party data. All Netflix needs to do is partner with an ad tech platform to get an ad business up and running. (The Trade Desk has been circulated as a likely partner.) And watching content on streaming is a pretty straightforward experience: it’s easy to drop in ad spots before or after shows, and during them, just like linear TV. And connected TV offers even more options such as ads appearing alongside the search bar or in the screen menu. Knowing Netflix’s aversion to advertising, I suspect the company will avoid interruptive ads even for a lower-price tier.
  • Ads will get creative. Sure, we’ll see plenty of traditional commercial spots like you see on Hulu. But Netflix has been quietly building a merchandising operation over the past few years. The company recently launched its own digital commerce site to sell clothing tied into its popular shows. Netflix will likely create merchandise licensing deals to feature products from other businesses in its shows, such as Stranger Things. So far, Netflix CEO Reed Hastings has been reluctant to go down this route. But all bets are off now.
  • Netflix will get sold. I don’t think advertising will be a savior for Netflix. True, there is a receptive audience, but is there enough to sustain Netflix’s future? I predict that Netflix will be sold to Apple. Apple launched its own streaming service, Apple TV+, in 2019, and the company is hungry to grow. Apple has deep pockets and is eager to achieve brand cachet, which it lacks right now. But Netflix has plenty of brand cachet. I could see Apple buying Netflix but allowing the company to keep its own name. The most expensive part of owning a streaming service is creating contentNetflix gives Apple TV+ a way to accelerate content development.

What Brands Should Do

The Netflix news is a wake-up call for advertisers to embrace connected TV. The only reason Netflix has a future is because connected TV (CTV) has evolved far enough to allow for ads in the first place. Oh, and guess what? Executives at competitors such as Disney+ are doing exactly what Netflix is doing. Hulu, for one, already figured out how to crack the code with CTV ads.

According to Forbes, a recent study from the Leichtman Research Group estimates that 80 percent of TV homes in the U.S. have at least one connected TV device. That number represents a steady increase from the 57 percent logged in 2015, and 24 percent in 2010.

Predictably, CTV use soared during the pandemic: Forbes also cites a Nielson report, which notes that CTV viewing exploded from 2.7 billion hours during the pre-pandemic week of March 2, to 3.9 billion hours during the weeks of March 23, March 30, and April 6. Even during the week of May 4, when stay-at-home laws eased in some states, CTV viewing remained above pre-pandemic levels at 3.5 billion hours.

These stats are good news for advertisers embracing CTV. So is the fact that CTV allows brands to reach out to specific audiences. As Forbes notes, “CTV’s targeting capabilities are the ‘holy grail’ for advertisers.” Many CTV companies use ACR, or Automated Content Recognition, which collects data that can inform programming recommendations for users and better target ads to niche groups. Although audiences in the era of connected TV may not be as huge as the linear TV days, CTV helps brands better understand and reach their niche market effectively.

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Meta Misses the Mark; How Should Advertisers React?

Meta Misses the Mark; How Should Advertisers React?

Facebook Meta

Over the years, Facebook has been a Teflon brand. No matter how many controversies and setbacks the company has faced, it has seen its stock price and market capitalization soar. But all that changed on February 2 when Facebook’s parent company Meta announced earnings for the fourth quarter 2021. The company:

  • Missed its earnings estimates.
  • Reported that Facebook’s global daily active users declined from the previous quarter to 1.929 billion from 1.930 billion. Although Facebook has experienced drops in the United States before, this was the first time the world’s most popular social platform had experienced a decline in its user base.
  • Forecast weaker-than-expected revenue growth for the next quarter.
  • Said that the company would suffer a $10 billion revenue hit in 2022 because of the impact of Apple’s iPhone privacy controls launched in 2021.

Investors were stunned. The next day, Meta suffered a 26 percent drop in its stock price – the largest single-day drop in history. Not just for Meta. For any company.

Companies can have a bad quarter. But why did Meta suffer a historic drop in its stock price? There is no single, clear-cut answer. But a few factors no doubt played a role:

  • The drop in users, although not massive, stoked concerns that Facebook is finally beginning to feel the impact of its ongoing brand safety controversies and indifference from the growing Gen Z population. Losing members can be a red flag for advertisers, and Facebook needs advertising revenue to succeed.
  • Meta surprised investors by saying it still has not recovered from the impact of Apple’s consumer privacy controls. In 2021, Apple altered its operating system to require apps to get a person’s permission before tracking their data across apps or websites owned by other companies for advertising, or sharing their data with data brokers. This move curtailed the ability for advertisers and ad platforms such as Facebook to target digital ads across the web. Ad platforms such as Snapchat and Twitter said that the restrictions were either not hurting them or that they had figured out satisfactory ways to keep creating effective ads despite the existence of the privacy controls. It was alarming to hear that Meta had not figured out a solution yet.
  • Meta’s big bet on the next generation of the internet, the metaverse, is costing the company – a lot. Meta said that the company spent $10 billion in 2021 on various products that form the building blocks of the metaverse. That spend hurt profits. And the metaverse is still many years away, which has made investors ask: just how much is the metaverse going to cost Meta?

Even still, Facebook achieved $33.67 billion in ad revenue for the quarter, which was better than expected. Should Facebook’s advertisers be concerned? As an agency that helps many businesses build their brands and convert customers through Facebook advertising, we believe that if you advertise on Facebook, you should:

  • Keep advertising on Facebook if you are satisfied with your results so far. Based on our client work, Facebook continues to drive conversions even though the cost per conversion has increased and conversion rates are lower. Facebook remains an efficient and cost-effective alternative to competing platforms.
  • Adapt to the new reality of Facebook advertising. One of the challenges with Facebook advertising under Apple’s privacy controls is having access to less user data for targeting various audience segments with ads. We’ve been working with Facebook to develop workarounds such grouping our clients’ target audiences together to give the Facebook algorithm more data to work with a (as opposed to breaking up audiences into separate groups). We’ve also removed audience exclusions from campaigns. After we aggregated audience data and removed exclusions, we gradually began to see an improvement in ad conversions following a drop resulting from the privacy controls.
  • Keep an eye on the decline in users. Understand where they’re going when they leave Facebook. In particular, Facebook said that TikTok has emerged as a much stronger competitor. TikTok is especially red hot with the Gen Z generation. In addition, monitor sentiment among your audiences, foremost your customers. In light of Facebook’s ongoing controversies over privacy and the publication of harmful content, are your customers expressing concern? Is your brand safety at risk? (This may or may not be the case. As we’ve blogged before, social media will always be a messy place to live, and many brand have learned to live alongside that reality.

Advertisers have more choices than ever – emerging apps such as TikTok, retailer ad platforms such as Amazon Advertising, to name a few. The well-established ad platforms such as Google continue to launch new products. As always, we urge advertisers to stay on top of the evolving market. At True Interactive, we advocate for our clients by understanding how the ad industry is changing so that we can maximize clients’ return on ad spend. Contact us to learn how we can help you.

Photo by Dima Solomin on Unsplash

2022 Advertising and Marketing Predictions

2022 Advertising and Marketing Predictions

Advertising

Welcome to a new, adventurous year of advertising and marketing. The traditional tech giants are going to continue to fight each other for dominance – while TikTok will tap into the burgeoning creator economy to challenge them all for a slice of the advertising pie. Retailers everywhere are creating ad networks, but Amazon and Walmart have already established strong leadership early on. For the most part, businesses will be spending more – more on TikTok, more on Amazon, more on Google, and probably more on Apple’s fledgling ad business. But will they spend more on Meta? Read on for our insights into the year ahead.

Retailer Media Networks Proliferate – and Meta Loses Ground

One of the big stories of 2021 was the proliferation of media businesses operated by retailers such as Amazon, Macy’s, Target, and Walmart. In 2022, we’ll see more of them. Retailers are under great pressure to squeeze more margin out of their core businesses as the industry endures uncertainty. The most well established networks – Amazon and Walmart – are thriving because they tap into the data they collect about their customers (first-party data) to sell targeted advertising on their sites. In 2022, more retailers will use first-party data to help businesses create more targeted ads off-site, too, as an antidote to Apple’s privacy controls. In addition, non-retailers with large troves of first-party data, such as TikTok, will expand the same way.

I also believe Meta’s ongoing push into immersive reality will lose momentum. Meta has made an even bigger push into immersive reality (e.g., virtual reality and augmented reality) as part of its attempt to become the builder of the metaverse. Meta also intends for immersive reality to help the company maintain a dominant hold on social media and to squeeze upstarts such as Roblox out of the market. But the horse is already out of the barn: there are just too many players such as Roblox and Snapchat developing immersive reality applications for Meta to play copycat and use its size as an an advantage. And Meta has faced so much public blowback over its size and reach that squeezing out smaller players makes Meta more of a target for anti-trust regulation. Meta will lose ground, and gaming platforms such as Roblox will ascend in power.

— Tim Colucci, vice president, digital marketing

TikTok Dominates

TikTok is the world’s most visited site in the Internet in 2021, toppling Google, according to Cloudfare. TikTok will become the leader in paid social. Videos and fast-breaking cultural trends are becoming more prominent factors across all social media marketing, and TikTok has mastered both. Oh, and TikTok has another big trump card to play: the site is a magnet for Gen Z and Millennials, who together comprise about 42 percent of the U.S. population. As a recent New York Times profile noted, advertisers “are present like never before, their authentic-seeming advertisements dropped in between dances, confessionals, comedy routines and makeovers.” But TikTok is just beginning to monetize all that interest from advertisers. TikTok will follow the example set by Amazon Advertising and roll out more ad units that capitalize on the customer data the company is collecting. And look to TikTok to become a social commerce giant. If you thought 2021 was the year of TikTok, you ain’t seen nothing yet.

— Bella Schneider, digital marketing manager

The Creator Economy Gets Real

The creator economy refers to a class of businesses comprising millions of independent content creators and influencers. We are reading more about them partly because apps such as TikTok have given them more power and influence. The creator economy will become even more powerful. That’s because collaboration networks are proliferating. These networks give creators an all-in-one platform to create communities and build influence. In addition, gaming sites such as Roblox and Twitch offer creators opportunities to monetize their work with potential partnerships with brands, and crypto currency sites such as Rally.io make it possible for creators to mint their own currency. The big social networks such as Meta are responding by making themselves more attractive to creators. More businesses will tap into niche networks to partner with emerging creators who are lesser-known but possess tremendous street cred. Big-name partnerships with stars will still thrive, but the social media icons will need to make room for the new kids in town.

— Mark Smith, co-founder

Tech Titans Roar

We hear a lot about the big technology firms facing increased scrutiny from Congress and legislators around the world. But to me the more intriguing story is how the tech titans keep trying to outmuscle each other for advertising revenue, an example being Apple enacting privacy controls to hurt Facebook’s ad business. 2022 will ratchet up the fight:

  • Apple will start leveraging and monetizing the data they are collecting (and not allowing others to collect) in the form of some type of advertising platform. This is the culmination of Apple’s stricter privacy controls.
  • Google will remove more visibility and targeting options in the name of advances in machine learning and automation, thus protecting its core ad business by taking more control of it.
  • An increasing number of platforms will emerge that use first-party data to target and track and savvy advertisers will take advantage of this and diversify their advertising spend
  • Amazon will grow with even more ad units for Amazon Advertising and marketing offerings such as livestreamed commerce for businesses of all size, especially smaller ones. Google and Meta will lose market share.

Unfortunately, we can count on CPCs to rise across all platforms as they attract more businesses competing for ad inventory and keywords. It’s going to be a more expensive 2022, but also a more interesting one with more ad units proliferating.

— Kurt Anagnostopoulos, co-founder

Google Ads Become More Powerful

Given the evolution of keyword matching (now AI-powered to serve ads based on the meaning of a search query), and the simplification of the ad product offerings (as Google deprecating Expanded Text Ads next summer), we will see Google Ads become leaner but more powerful. Advertisers will be forced to rely more and more on Google’s algorithm to drive results – all this, at the expense of reduced control advertisers have over campaign settings (ad content, keyword matching, targeting choices, etc.). I believe the biggest changes will continue to happen on Google’s back end as it seeks to make the algorithm (automated bidding strategies used in ad campaigns) smarter. Thus, we will see increased focus on cookie-less conversion tracking and an expansion of first-party data collection capabilities in Google Ads (i.e., scaling up enhanced conversions).

— Héctor Ariza, digital marketing and analytics manager

Social Media Ad Dollars Get Redistributed

Lush Cosmetics recently said it is quitting Facebook, Instagram, Snapchat, and TikTok over concerns that those platforms have a negative impact on teens’ mental health. (The company will remain active on LinkedIn, Pinterest, Twitter, and YouTube.) Lush said it will happily lose $13 million in sales because of the digital detox. It remains to be seen whether Lush will reactivate the accounts it quit (Lush quit some social sites in 2019 before returning), and of course a big question is whether more businesses will take such a drastic approach. I don’t think we’ll see more businesses take the Lush approach – social media is just too important – but they will shift some of their ad dollars away from Facebook and Instagram. In the past, businesses have remained loyal to Facebook (now known as Meta) because the site is critical to their advertising and marketing strategies. But the whistleblowing activities of ex-Meta employee Frances Haugen have raised the stakes. She asserted that Meta has kept internal research secret for two years that suggests its Instagram app makes body image issues worse for teenage girls. Businesses will monitor what their customers, investors, and employees say about Meta especially in this era of purpose-driven branding. Some will shift their advertising to Snapchat and TikTok while Meta takes the heat for brand safety issues. But this shift may be temporary. Meta will probably mollify brands with some updates to its products to create more brand safety, as it is already doing with its news feed to address concerns over lack of user control over their news feeds. In addition, Meta faces the ongoing threat of regulatory oversight. More accountability will come to Meta in 2022.

— Beth Bauch, director, digital marketing

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Image source: https://pixabay.com/photos/year-2022-track-new-year-calendar-6786741/

 

2021 Holiday Ads: Hope and Realism

2021 Holiday Ads: Hope and Realism

Advertising

Ready for some memorable holiday ads? In response to widely reported supply chain issues, some brands have teed up their holiday ads to come weeks ahead of traditional schedules. And as was the case last year, the campaigns are tasked with addressing the elephant that hasn’t left the room: Covid-19 and its lingering effects. If striking the right tone somewhere between hope and realism can be tricky, a few reliable themes — from connection to music, humor, and cheer — are helping brands thread that needle. Here are some examples:

Connection

We may live in divided times, but Etsy’s hopeful Give More Than a Gift campaign for 2021, which highlights unexpected connections, reminds us of our best selves. In one spot, a friendship springs up between two people from different walks of life. The tightly edited ad runs a mere 30 seconds, but it packs a wallop. The e-commerce company’s focus on unique, handmade items figures into the story, and the implicit message — that Etsy’s constellation of DIY sellers may help shoppers avoid the headache of larger retailers with supply chain issue delays — doesn’t hurt the brand, either.

Music and Surprise

The right music is key to a successful ad campaign, and brands have long been incorporating modern interpretations of classic hits in hopes of connecting with shoppers on a nostalgic level. In fact, according to Chelsea Gross, director analyst at research firm Gartner, nostalgia is particularly resonant this year as consumers potentially gather with loved ones after a year or more of pandemic-era separation.

For financial reasons, advertisers don’t always use the original song. It’s also worth noting that employing a cover can also add a unique spin, beyond the song’s original interpretation, to a nostalgic favorite. Consider the spot from Dutch e-tailer Bol.com, which is set to a cover of Cyndi Lauper’s “True Colors.” In the ad, a boy who originally asked for a doll turns the soccer ball he got instead into an imaginary friend. Cue all the expected cozy feelings — but Bol.com is mining a different theme here, and an unexpected twist at the end of the spot gives Lauper’s familiar song added resonance. (Spoiler alert: this kitten has claws!) By subverting expectations — of a familiar song, of a storyline that, at least initially, seems familiar — the brand grabs our attention.

For a brand like Amazon, deep pockets can mean the freedom to use a song in its original incarnation. This year, the e-commerce giant debuts “Hold On” from Adele’s new album 30; the song hits a home run on several levels, playing backdrop to a spot that doesn’t shy away from the lingering challenges people face from the pandemic. The storyline isn’t overtly festive: two women share a quiet connection over their love of birds. But the ad, which is aligned with the launch of Amazon’s Christmas gift shop, covers a lot of ground, addressing mental health, loneliness, and the power of connection in a subtle two-and-a-half minutes.

Humor

Like Amazon, Extra gum isn’t afraid to look at the curveballs life can throw, but it takes a different tack, using humor to lean into some inconvenient truths about the holidays. As Extra spins it, while it’s great to be gathering for the holidays in a way 2020 simply didn’t allow, some time-honored traditions — from passive-aggressive presents to long-winded relatives — remain as tricky as they ever were before the pandemic. The solution? “Chew it before you do it.” In other words, chewing a piece of Extra gum can give that extra moment of pause, and transform a potentially awkward moment into a time of grace and connection. And who can argue with that?

Cheer

Of course, holiday ads for time immemorial have succeeded by tugging on the heartstrings, and a few notable campaigns from 2021 take that approach and run with it. Consider the McDonald’s U.K. ad that introduces us to a little girl and her imaginary monster friend, who bond over the Christmas ritual of leaving out bags of McDonald’s carrots as treats for Santa’s reindeer. Time passes (a cover of Cyndi Lauper’s “Time After Time” plays in the background – apparently 2021 is Cyndi Lauper’s year), and we think the girl has outgrown her joyful friend. But — spoiler alert! — you might need to pull your hanky out. Some friendships are meant for the long haul.

Finally, consider Apple’s spot, which was filmed with an iPhone 13 Pro by the father-and-son team of Ivan and Jason Reitman. The three-minute short follows the efforts of Olive, a little girl determined to keep her snowman buddy alive all year ‘round. An unexpected finale doesn’t quite cue up as expected, but the overall vibe — and a dedication to the ones we’ve waited all year to be with — goes for the feels in a big way, and succeeds.

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Google Firebase: A Workaround for Apple’s Privacy Controls

Google Firebase: A Workaround for Apple’s Privacy Controls

Apple Google Privacy

Apple’s Application Tracking Transparency (ATT) privacy control has caused understandable alarm among businesses that rely on mobile to create personalized advertising. But advertising agencies and their clients are figuring out workarounds. One of them is Firebase. Here’s a quick overview:

The Fallout of Apple ATT

Apple’s ATT is a consumer privacy control that Apple rolled out with an update to Apple’s operating system in 2021. ATT requires apps to get a user’s permission before tracking their data across apps owned by other companies for advertising, or sharing their data with data brokers. Apps can prompt users for permission, and in Apple Settings, users will be able to see which apps have requested permission to track so they can make changes to their choice at any time.

Advertisers have feared that ATT will trigger an uptick in users opting out to having their behavior tracked. Consequently, advertisers will have a harder time serving up targeted ads because they cannot track user behavior. This concern is well founded. As many as 96 percent of users in the United States are opting out of having their behavior tracked. A number of businesses are shifting their ad budgets to the Google Android operating system and away from Apple’s iOS.

Others are trying to find workarounds. And this is where Firebase comes into play.

How Firebase Works

Firebase is Google’s mobile, cloud-based platform that helps users quickly develop apps. People and businesses can use Firebase to accomplish a variety of tasks, such as accelerating app development and test the performance of apps, including A/B testing. Businesses can integrate Firebase with Google’s Android operating system, iOS, and the web. This Venture Beat article delves into more detail (probably more than an advertiser needs to know), and Google provides context as well.

Firebase becomes really interesting to advertisers for this reason: with Google Analytics for Firebase, a business can export its mobile app data (iOS and Android) to a Google-hosted data warehouse known as BigQuery. From there, a business can match behavior via Google User-ID, a feature that lets a user or business associate a persistent ID for a single user (with that user’s engagement data from one or more sessions initiated from one or more devices).

By contrast, before the era of ATT, an advertisers would have access to mobile device IDs for Android and iOS environments. The advertiser could download device IDs from Apple iOS. Then the advertiser could target different people directly with personalized ads – at scale. That’s because the advertiser would have access to those individual device IDs from app analytics accounts. But you cannot do that with Apple ATT anymore.

Firebase does not track mobile device IDs, per se. Rather, Firebase creates audiences inside Firebase based on user events, such as a person registering to use an app, installing it, or making a purchase on the app. With Firebase, the advertiser downloads that audience transaction data through the dashboard the advertiser uses to create Google ads. (For more detail, check out this article, which delves into the mechanics of managing data on Firebase to understand user behavior across apps.)

We have been using Firebase to support clients’ mobile ad campaigns, and we are seeing results. For one client, we’ve seen an increase in revenue by up to 7 percent over the past six months while cutting ad spend in half.

It’s important for True Interactive to continue delivering excellent results through online advertising. We’re actively monitoring our clients’ advertising performance results as we assess the impact of ATT. Yes, the world is changing. But as you can see from our client experiences with Firebase, an increased privacy control does not mean the end of effective advertising.

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Why Facebook’s Ad Business Will Take a Hit — and What Advertisers Should Do

Why Facebook’s Ad Business Will Take a Hit — and What Advertisers Should Do

Apple Facebook Uncategorized

On September 22, Facebook made an unusual announcement well ahead of its third-quarter earnings, which won’t be shared until late October. In a blog post, Facebook indicated that its third-quarter results will take a hit because of the impact of Apple’s increased privacy controls. Let’s take a look at the news and what it means.

What Facebook Announced

  • Facebook confirmed that for the third quarter, the company’s advertising business will take a financial hit because of the impact of Apple’s Application Tracking Transparency (ATT), which went into effect in 2021 with a recent iOS update on users’ personal devices.
  • Under ATT, users are asked to give apps permission to track their behavior on their Apple devices. Facebook needs Apple users to give apps permission to track their behavior; Facebook has built a thriving advertising business based on its ability serve up targeted ads to iOS users based on their behavior off Facebook. But as many as 96 percent of users in the United States are opting out of having their behavior tracked.
  • In a blog post, Graham Mudd, vice president of Product Marketing, Facebook, wrote, “As we noted during our earnings call in July, we expected increased headwinds from platform changes, notably the recent iOS updates, to have a greater impact in the third quarter compared to the second quarter. We know many of you are experiencing this greater impact as we are.”
  • Mudd also said that Facebook underreported iOS web conversions by approximately 15 percent. “We believe that real world conversions, like sales and app installs, are higher than what is being reported for many advertisers,” he wrote.

What Facebook’s Announcement Means

  • Facebook’s war with Apple will intensify. Apple could find ways to impose even more privacy controls.
  • More advertisers will bolt to the Android operating system and take their ad business to Google.
  • Facebook will be forced to become more transparent to ad partners about its ad performance, especially after admitting that the company underreported iOS web conversions.
  • Facebook will probably devise more ways to mine first-party data from its own platform and Instagram to sell ad space.

What Advertisers Should Do

  • Consider tapping into your own first-party data more effectively to create ads (and True Interactive can help you do so). For example, collect more first-party data by using cookies to understand who visits your site; or run a promotion that collects email addresses. Collect purchase data if applicable to your site.
  • Consider relying on advertising platforms such as Amazon and apps such as Snapchat and TikTok that have strengthened their own ad products through their own proprietary first-party data.
  • Watch for the emergence of new tools and approaches. Apple’s ATT will inspire the emergence of workaround tools as well as approaches for developing personalized content. This is happening already as Google adopts privacy controls.
  • Review Facebook’s advice for how to analyze your performance and adapt your ad strategies on Facebook (or ask your agency partner to do so for you). Mudd provided some detailed steps to take in his post.
  • Consider negotiating more favorable rates for your ad account with Facebook if your performance is dropping but you still want to work with Facebook.
  • Don’t panic and change your ad strategy completely. This situation is still evolving.

At True Interactive, we’re doing the heavy lifting to help our clients navigate these changes. Bottom line: be ready to adapt.

Contact True Interactive

To succeed with online advertising, contact True Interactive. Read about some of our client work here.

The Impact of Apple’s New iOS Privacy Controls

The Impact of Apple’s New iOS Privacy Controls

Apple

Earlier in 2021, Apple tightened privacy controls through an update to its iOS operating system. The news created alarm among advertisers and ad platforms (notably, Facebook) who said they believe Apple is hurting their ability to serve up effective and relevant advertising. So, what’s happened since then? Let’s take a closer look at the aftermath of Apple’s controversial decision.

Apple Announces Application Tracking Transparency

The privacy control that Apple launched is known as Application Tracking Transparency (ATT). ATT requires apps to get the user’s permission before tracking their data across apps or websites owned by other companies for advertising, or sharing their data with data brokers. Apps can prompt users for permission, and in Settings, users will be able to see which apps have requested permission to track so they can make changes to their choice at any time.

When Apple previewed ATT in 2020, Facebook led an angry protest from advertisers who were upset that the new opt-in program would result in plunging ad revenues and less relevant advertising resulting from a loss of personalization. Facebook argued that ATT would be unfair to the many small businesses that rely on Facebook.

The Impact of Application Tracking Transparency

So, what has happened since ATT went live? So far, here are the major developments:

  • Users reject tracking. As many as 96 percent of users in the United States are opting out of having their behavior tracked. Those high opt-out rates out do not kill advertising at all. In fact, businesses that have amassed proprietary first-party user data should continue to provide relevant ads. But businesses that rely on tracking behavior across the web will need to accept the reality that their ads are less targeted.
  • Advertisers flee Apple. Many advertisers are not waiting to discern the potential impact of ATT. According to The Wall Street Journal, prices for mobile ads directed at iOS users have fallen, while ad prices have risen for advertisers seeking to target Android users. That’s because a number of businesses are shifting their ad budgets to the Google Android operating system and away from Apple’s iOS. This shift does not affect Apple because Apple collects no ad revenue from third-party iOS apps. We do not yet know how Google may benefit from the shift (and Google does rely on ad revenue heavily).
  • No impact on Facebook – so far. Facebook announced its second-quarter 2021 earnings on July 28. The company’s ad revenues showed no sign of slowing down and beat Wall Street expectations: $29.08 billion, vs. $27.89 billion as expected by analysts, according to Refinitiv. Facebook said advertising revenue growth in the second quarter of 2021 was driven by a 47 percent year-over-year increase in the average price per ad and a 6 percent increase in the number of ads delivered. But Facebook has not backed off from its position that ATT is going to hurt the company and advertisers. The company lowered is earnings outlook for the third quarter partly because the company believes ATT’s impact has yet to be felt. In its earnings announcement, Facebook said, “We continue to expect increased ad targeting headwinds in 2021 from regulatory and platform changes, notably the recent iOS updates, which we expect to have a greater impact in the third quarter compared to the second quarter.”
  • Twitter shrugs off ATT. Twitter, like Facebook, says it has not been affected by ATT (so far). In its latest quarterly earnings, Twitter showed robust revenue growth. Twitter also said that the impact of ATT was lower than expected. And Twitter is more optimistic about the potential impact of ATT going forward. In its earnings announcement, Twitter said, “We continue to expect total revenue to grow faster than expenses in 2021 — assuming the global pandemic continues to improve and that we continue to see modest impact from the rollout of changes associated with iOS 14.5.”

What Advertisers Should Do

  • Examine your ad performance. Examine the effectiveness of your advertising on iOS. Have you lost your ability to bid on ads because of users opting out of being tracked? Is your ad performance actually slipping? If you work with an agency to manage your ads, ask them for a complete report. And then examine your performance throughout 2021. If you see a noticeable slide, then adapting your spend to Android may make sense, but if your performance is only marginally affected, remember that your competitors are probably experiencing the same outcome.
  • Consider tapping into your own first-party data more effectively to create ads (and True Interactive can help you do so). For example, collect more first-party data by using cookies to understand who visits your site; or run a promotion that collects email addresses. Collect purchase data if applicable to your site.
  • Consider relying on advertising platforms such as Amazon and apps such as Snapchat that have strengthened their own ad products through their own proprietary first-party data.
  • If you rely heavily on Facebook as an ad partner, heed Facebook’s detailed advice for adapting to ATT (or ask your agency partner to do so).

At True Interactive, we’re doing the heavy lifting to help our clients navigate these changes. Bottom line: be ready to adapt. But don’t panic.

Contact True Interactive

To succeed with online advertising, contact True Interactive. Read about some of our client work here.

Photo by Zhiyue Xu on Unsplash

For More Insight

Apple Announces New Privacy Features,” Mark Smith.

The Facebook Spat with Apple: Advertiser Q&A,” Taylor Hart.

Google Responds to Apple’s App Tracking Transparency,” Taylor Hart.