Facebook has (briefly) averted a crisis in its advertising business. After announcing that beginning with iOS 14 it would require app developers to ask permission from users in order to track them across the web, Apple says it will delay the change until 2021. Facebook had previously said that the new requirement would effectively wipe out billions in revenue it pulls in annually via advertising pegged to information it gleans from iOS users.
By delaying the change, Apple is merely giving Facebook and others time to adjust to the new reality — it still intends to require all developers to ask for permission to gather a user's Identifier for Advertisers (IDFA), a marker unique to each mobile device. The IDFA is important because it allows advertisers to learn whether or not a user clicked on an ad and downloaded their app, for instance. Most users are expected to block tracking when prompted, even though advertisements are how many apps can be offered for free.
Advertising conversion — The issue hurts Facebook's business selling advertisements in other applications besides its own. The mobile gaming company Zynga offers its games for free but places banner advertisements inside them; many of those advertisements are sold by Facebook. If Facebook cannot tell an advertiser the conversion rate on their ads, or how often people who saw an ad clicked through and bought something, the advertisements become much less valuable. Advertisers want to know whether or not their ads are actually having an impact and therefore worth spending money on.
One industry firm estimated that roughly $76 billion is spent each year on advertisements meant to drive app downloads. Under Apple's change, Zynga could lose as much as 10 percent of its advertising revenue.
Facebook will now have until 2021 to figure out a new way to track users, get users to consent to tracking through other means, convince Apple to backtrack again, or accept that ad rates will fall under the new regime.
Apple's power — The situation highlights the immense power that Apple holds over developers in its App Store, the only place where iOS users can officially download new apps. Apple says this change to IDFA tracking is intended to give users back more control over their privacy online. But the company also charges a 30 percent commission on in-app sales, and blocks apps for sometimes arbitrary reasons.
In this case, it's hard to disagree with Apple's reasoning. But it's notably allowing itself to continue tracking IDFA's without user consent, which could draw more anti-competitive scrutiny at a time when the company is under attack for some quarters for hampering developers who try and bypass its 30 percent commission.