Apple's Privacy Policy: A Game Changer for App Developers
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Understanding the Impact of Apple's Privacy Changes
In recent times, established social media platforms have faced significant challenges. A struggling economy has tightened their main source of income: advertising. Even before the economic downturn of 2022, platforms like Snapchat, Twitter, and Facebook pointed fingers at Apple as a contributing factor to their financial difficulties.
When Apple introduced its App Tracking Transparency (ATT) framework in 2021, I dedicated a considerable amount of time to clarifying to consumers that this was not an initiative for Apple to track users. Instead, it was aimed at revealing how apps had been collecting and utilizing user data for over ten years. Apple's pioneering measures specified precisely what actions were permissible for its vast array of app developers.
These developers can harness data regarding user activities on their iPhones for targeted advertising but are prohibited from sharing that information externally. This is not a loophole; it is a solid barrier. Without the capacity to share data with third-party partners, app developers seemingly lost significant opportunities for contextual advertising and revenue generation.
It took some time for Apple to implement its privacy policy on iOS, which debuted with version 14.5. Many app developers, particularly Facebook, expressed strong objections to the new regulations. Once it was finally rolled out, users encountered a new pop-up screen—regardless of whether they had already installed the app—prompting them to allow tracking of their activities across various applications and websites. If users opted out, the data collected by the app would no longer be available for transfer across different services and platforms.
To assess the effectiveness of this system, one need only examine the latest earnings reports from Snap, Twitter, and Facebook. Snap, in its recent report, attributed part of its struggles to “Apple’s 2021 iOS update.” Facebook had previously warned that the iOS privacy measures could cost the company around $10 billion, while Twitter, which initially claimed it had sidestepped some of the privacy changes' worst effects, is now reportedly losing over a quarter of a billion dollars in market value alongside peers like Meta, Snap, and Pinterest.
It's important to clarify that Apple is not undermining its own app business through these measures. Clearly, these app companies are grappling with various macroeconomic pressures. Twitter, for instance, is facing unique challenges under Elon Musk's leadership, who is navigating his own vision for the platform.
Nonetheless, Apple’s iOS privacy features underscore the immense control the company wields over the app economy it primarily established. This sector has been rapidly expanding; since the launch of the App Store, Apple has disbursed $260 billion to developers, with $60 billion of that total occurring in 2021 alone. This translates to developers receiving approximately 70% to 85% of their app revenue after Apple's cut, a figure that has been adjusted in recent years to favor smaller developers.
Apple's adjustments to its revenue-sharing model serve as a reminder of its dominant position in the iOS app marketplace. The dispute between Apple and Epic Games, where the latter attempted to bypass Apple's in-app purchase regulations and was subsequently removed from the App Store, illustrates that it is essentially Apple's terms or nothing.
This conflict, however, pales in comparison to the long-term ramifications of Apple's iOS privacy policies. The real change is not rooted in the relationship between Apple and its app partners; rather, it is driven by consumers, who now have the power to easily choose not to share their data by selecting “Ask App Not to Track.”
This new iOS feature has seen remarkable acceptance, with early data indicating that a striking 96% of iOS users are opting out of app tracking through this straightforward prompt. It raises the question of whether Apple anticipated such a strong response.
Major platform companies are now adjusting their systems to explore new methods for targeted advertising and alternative revenue streams, as they have no choice but to adapt. In a way that was previously unimaginable, Apple has fundamentally altered the rules of engagement in the app economy, akin to a game where the rules have suddenly shifted without warning.
While I empathize with app developers facing these changes, from a consumer standpoint, we still enjoy the same old game. The absence of contextual ads is difficult to notice, as few would lament the lack of yet another Timberland shoe advertisement appearing on Twitter or Safari after discussing it on Facebook.