Apple Privacy Update Impact on Advertisers: Q3 Earnings Analysis


  • Apple’s recent privacy update has caused widespread disruption in the mobile ad market.
  • Several companies mentioned the iOS 14.5 update to their businesses on their latest earnings calls.
  • An analysis of call transcripts using research tool Sentieo reveals how advertisers are adapting.

Apple’s April privacy update has sent shockwaves through the mobile advertising market, making it costlier for advertisers to acquire new customers on platforms like Facebook, Snap, and YouTube.

The so-called App Tracking Transparency change forces app developers to ask users for their permission in order to track them across other apps and sites. With most users opting out, advertisers have less available data about the audiences they are targeting and whether their campaigns were effective. Businesses such as gaming apps and ecommerce companies that lean heavily on placing ads in other apps or using advertising methods like retargeting to attract new customers have been particularly affected.

Insider reviewed recent earnings call transcripts using the Sentieo Inc. research tool to analyze which businesses had felt the brunt of the impact the most and how they are adapting their marketing in response.

Apple’s privacy update drove up the price of mobile ads

Executives from companies including online dating giant Match Group, gaming companies Electronic Arts and Rovio, watchmaker Movado Group, fitness equipment company Peloton, shopping merchant Poshmark, art marketplace Redbubble, teledentistry brand SmileDirectClub,  and ecommerce company Zalando noted on their earnings calls how the mobile ad environment had become more challenging, disruptive and competitive — more expensive, in other words — in the third quarter.

Stephanie Phair, chief customer officer at online luxury fashion marketplace Farfetch, said the company’s demand generation — or marketing costs — as a percentage of revenue was higher than it had initially planned in the quarter due to “greater-than-expected” cost-per-click inflation. Elsewhere, Wayfair‘s advertising accounted for 10.1% of its net revenue, up from 9% in the year-ago quarter, which its CFO said was “in part” due to the iOS changes.

Some advertisers, such as Poshmark and Zynga pared down their ad outlay while they sorted through the Apple update — though both indicated they are ready to ramp up spending again or have already begun doing so. Naked Wines said it reduced spend “to a rate that is supported by current performance.” Mobile gaming company DoubleDown Interactive decreased its sales and marketing expenses in the quarter by 18% year-on-year.

“Cost-per-install, or CPI, for mobile users trended higher during the summer, which caused us to be more cautious in advertising spend during the period,” said DoubleDown CFO Joseph Sigrist on the company’s earnings call in November.

Some advertisers have been switching up their media mix

With Apple’s privacy changes making it more difficult to acquire new users via channels like Facebook and mobile app ads, some advertisers sought to diversify their media mix.

“We have at least three to five new channels that … we’ve started to see significant traction on in the last quarter,” said Justin Schreiber, CEO of


telehealth

company LifeMD. “And we actually believe that those channels and others are more scalable.”

Apple’s own Search Ads product was one location for the ad budgets of companies including Bumble, Farfetch, according to their earnings call transcripts. Analysts at Bernstein Research estimated earlier this month that Apple’s privacy update could benefit its own ads business to the tune of $1 billion in additional revenue per year. Apple’s Search Ads prices had already increased 67%, as measured by cost-per-click, in the second quarter, Bernstein’s analysts said.

Elsewhere, some advertisers turned their attention to the Android mobile operating system, which hasn’t yet rolled out a similar tracking update. 

“There’s been a little bit of a rush to advertise on Android and acquire people on Android,” said Bumble president Tariq Shaukat. “So that’s led to a little bit of price inflation on the Android side.”

Other companies are reallocating spend to other channels. Farfetch called out its work with YouTube and investments in


influencer marketing

, and SmileDirectClub has moved more of its ad dollars to TV. 

“By carrying a stronger TV weight, we will drive greater aided and unaided awareness,” said SmileDirectClub CEO David Katzman. “This is also a longer-term strategy focused on building our base across consumers, including the higher income customer, rather than paying for each sale we get.”

Other advertisers are ready to seize the opportunities sparked by Apple’s tracking changes

Some executives were eager to signal to investors that Apple’s privacy changes could present an opportunity for their companies versus their competitors.

Activision Blizzard, Booking Holdings, and Bumble all highlighted the various strengths of their large data-driven marketing teams.

“When we see changes in dynamism in the industry because of IDFA, they’ve created market opportunities that we’ve been able to capitalize on,” said Humam Sakhnini, president of the King Digital Entertainment unit within gaming company Activision Blizzard.

Like other consumer-packaged goods companies, Clorox didn’t directly address Apple’s privacy update in its earnings call, but CEO Linda Rendle said at the Bernstein Operational Decisions Conference earlier this month that it had been fully prepared for the changes well ahead of time.

“And actually our ROIs and advertising went up even though we spent more money,” Rendle said, referring to the return on the company’s advertising investment.



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