Protecting user’s data from websites’ tracking comes at the cost of advertising revenue.
If you are a consumer, you probably cheered Apple’s move to allow users to alert any company they digitally connect with to opt out of tracking them. However, as of now, Apple is one of the only companies that has applied this strict rule to their security policies. These policies aim to make those using Apple devices more secure and choose which companies they want to have them collect personal data.
This is especially important when checking out new websites to ensure they do not track your personal information unless you explicitly want to give them your data on an as-wanted basis.
When confronted with Apple’s new security do not track policy, the advertising industry wanted this presented as a secondary option, not as one that shows up when you first access a new website or app. Indeed, the only way they can give advertising messages to you is to have your personal information via a cookie or some other means to record personal data for advertising purposes.
Apple resisted this plea from many sites and the advertising industry, directly impacting search engines such as Google, Bing, etc. These search engines depend on cookies to track you and send customized ads.
On the other hand, there are many sites that I do want to track me so that I can get information or even ads that would interest me. This is especially true of news sites I follow and services like Facebook, Pinterest, and others I consider of interest and want customized data and ads.
While it is clear that Apple’s do not track policy has significantly impacted digital advertising, one example that came up last week shows more clearly how Apple’s security policy can impact a company.
In a post in Payments.com talking about Snap’s weak sales growth last quarter, they shared the following insight and analysis-
In Snap’s earnings results announced Thursday (July 21), the social media company recorded its weakest-ever quarterly sales growth, where sales were up 13% year on year to $1.1 billion.
But beyond the top-line growth deceleration, where years ago that metric had been up triple-digit percentage points (and the compound annual growth rate, or CAGR, had been 50%), lies a deeper set of pressures that served to send the shares crashing roughly 40% Friday (July 22).
Yes, the company has decided to cut spending. Yes, the digital advertising market is seeing competition. But the steep drop, and the tens of billions of dollars in lost market cap that Bloomberg estimated had been seen in sympathy across platforms speaks to something larger.
The key is that Apple has changed its privacy policies, and as a result, users can deny permission to be tracked.
During the question-and-answer session with analysts, Snap Chief Financial Officer Derek Andersen said, “the deceleration began with the platform policy changes implemented in Q3 of last year.” The changes are impacting the traditional models that are, “used to drive the direct response to advertising business, as well as the tools used to measure the returns from that direct response advertising.”
In the early 1990s, I had a discussion with a top executive at a company who explained to me the importance of targeted ads. This discussion was well before commercializing the internet, and Google was still just a Stanford research project for Larry Page and Sergey Brin. However, he was a highly accomplished pilot and pointed out that the current ad model did not work. He was referring to blind snail mail ads sent to people who had no interest in these mailed ads. It was known as direct mail marketing, and before 1990, it was the dominant way advertisements were sent out besides appearing on TV, in magazines, and newspapers.
He shared that as a pilot if an ad had anything to do with planes, plane equipment, and products and services, he immediately gravitated to those ads and disregarded any others. At the time, I was an avid scuba diver and had a similar experience as any info or ads about diving was of great interest to me.
He noted then that the ad market was broken and needed to be reinvented in our digital future.
Of course, he was 100% correct, and by 1995, with the introduction of the world wide web and search engines, targeted ads became a reality.
They first came in what was called banner ads and were relatively un-targeted. But Google turned the digital ad market upside down with new algorithms that looked for personal data about a person’s interests, and the digital ad market took off.
Twenty-five years later, the world wide web has grown exponentially with billions of users accessing digital information on multiple devices, and conceptually every one of them is a target for ads.
Until Apple made this move to give users more direct control of a person’s data, one had to work hard to opt-out of sharing their information to most sites. Now Apple forces the “do not track” me option up front, which makes it easier to keep people’s information from being used to track them.
Although this is painful for advertisers, it is a welcomed advance for consumers who want more security and privacy in their digital lives.
