The Power Shift in Mobile Ad-Tech
Advertising Technology (Ad-Tech) is a very murky world that far too few marketers understand. Littered with companies of varying sizes and backgrounds that pop up overnight entering every nook and cranny of the landscape — all purporting to help brands ‘reach the unreachable’ and as Zenith Media states, “…charging fees, and providing unknown value due to their lack of transparency.”.
Words like ‘programmatic’, ‘retargeting’, ‘location’, and ‘attribution’ have bounced around media agencies for years, and their clients have bought every bit of it to ensure that they weren’t left behind when it came to topping up their media spend with a low-cost, low-risk algorithmic investment with the lure of connecting their brand to millions of customers via the most powerful marketing and commerce device ever created — the smartphone.
We’re Way Beyond the Banner Now…
Unfortunately, the high-tech, hyper-measurable world of digital media become overly complicated and bloated very quickly in the 2010s. DSPs, Ad Servers, DMPs, MMPs, SSPs and the Media Agencies all taking a cut here and there, meant that brands who were not paying attention to their return on ad spend (ROAS) far too slowly realised that they were wasting billions of dollars. Did brands stop spending? No way! There is too much at stake.
The Programmatic Media Minefield
Money For Nothing — Well Almost Nothing
In early 2020, PWC UK did some extremely detailed research that helped illustrate where the programmatic money flowed once Advertisers agreed to a digital media ad-spend and compared that to what the Publisher received.
It’s hard to not be greatly concerned with 49 cents in every dollar evaporating via the programmatic supply chain. Worse still an “Unkown delta” of 15% being costs unable to be accurately accounted for — seemingly spread about the supply chain in the form of currency conversions and other costs between the DSPs and SSPs, according to PWC.
The Data Doesn’t Lie, Does It?
Powering the complicated systems of programmatic media is a staggering amount of data that is harvested from millions of websites and apps running on billions of PCs, tablets and especially smartphones. This data is the currency that the DSPs and SSPs use to put a value on the audience reach of the publisher’s network relative to the media objectives that the advertiser has. Just as TV ratings set the price for advertisers to reach millions of viewers watching the 6pm News every night.
Furthermore, this web of connected systems uses your data to validate the effectiveness of digital media spend in terms of customer acquisition costs (CAC) and retargeting — the annoying trend where ads for the product you bought on Amazon last night are now appearing on every website you visit.
(Changes, They Are) Blowing In The Wind
Every device connected to the internet has a unique identifier that communicates with advertising networks. On your desktop/laptop, it is typically ‘Cookies’ installed by the websites you visit. On your smartphone and tablet, it’s a unique ID that is passed back to ad networks for verification and attribution.
Some years ago Apple stopped using the Unique Device ID (UDID) to identify a device to an ad-network and created the Identifier For Advertisers (IDFA) and the market suspected that there was the chance that other more significant changes would follow. That time has come.
Unlike the UDID, the IDFA can be changed (reset) and as we would soon discover, it could be turned off.
Then in 2016 when Apple released iOS 10, there was an interesting feature buried deep in the Privacy settings called Limit Ad Tracking (LAT).
By enabling LAT, your IDFA was anonymised and any purchase or download attribution, as well as other user data, were now of little value to any of the third-party companies in the AdTech space looking to use it to better inform and/or justify the value of reaching you and your theoretical audience cohort. However, LAT was Opt-Out only and not easily accessible.
IDFA (Sample) - EA7583CD-A667–48BC-B806–42ECB2B48606LAT Enabled — 00000000–0000–0000–0000–000000000000
Estimates are that ~17% of iPhone users have LAT enabled in iOS 13. That’s a lot of user data flowing freely to third-parties globally.
With the launch of iOS 14 due in September 2020, the shift in power for users’ data (specifically for advertising) will start to swing 180º overnight.
Apps that use the IDFA will be forced to show the message below to users when the app opens — in much the same way that Location Services permission is requested.
Some straw poll estimates put the percentage of users that would Allow Tracking to be 20% or less…likely much less.
The reduction in this data flow will significantly impact the value of the very sophisticated Data Management Platforms (DMPs) developed by the world’s media agencies.
What About Facebook and Google?
Millions of apps have the Facebook and Google SDKs embedded in them to deliver features such as Login, Analytics and Advertising.
With LAT being implemented at the operating system level on a device running iOS, the valuable data that used to flow to Facebook and Google will decrease in value — fast. For Facebook where 98% of its revenue is generated from advertising, this is not great news.
From the Alphabet / Google side of the market, the news is just as worrying. Google has had their version of LAT running for a few years now — called Ad Personalisation and much like LAT, it will anonymise your data preventing any valuable retargeting or attribution. The trend towards users turning Ad Personalisation off in Android is less impactful right now as there are so many versions of Android running across hundreds of device types — many in developing countries where digital advertising networks are not as well established. That being said, Apple and Google tend to be in lock-step when it comes to privacy and their advertising networks.
Surely The AdTech Market Will Adapt?
Yes, it is highly probable that the AdTech market will adapt and find new ways to support what is an US$80B industry. How rapidly this might happen is far from clear.
Why? Well, iPhone users are loyal. They love new devices and they always make sure to update to the latest version of iOS when it’s released.
When Apple releases a new iOS version (usually in September each year) within 45 days, between 50% and 75% of all Apple iPhones have upgraded to the new version. Below is an example from 2019, 30 days after the release of iOS13.
Apple openly publishes the share of iPhones that are using the latest version of iOS and as of June 17, 2020 — 92% of all iPhones introduced in the last four years use iOS 13.
Let’s put these percentages into real numbers (for the US market) that might Allow Tracking via their device. iOS 13 assumes Opt-Out. iOS 14 assumes Opt-In:
Yes, there will be alternative ways to measure the value of AdTech investment by brands, however, with a significant reduction in the scale of data being gathered and a number of other potential changes to the Apple advertising and attribution technology, the broad outlook for AdTech isn’t great.
The iOS advertising data market in the US alone could drop from hundreds of millions of users to less than 50 million in a matter of months.
That being said, there may well be other media that could reap the benefits of this shift. Time will tell.
Below is some incredibly knowledgeable and detailed analysis of the LAT changes coming in iOS 14. They are all worth a read.
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Media Agencies — Working in tandem with advertising agencies. The role of a media agency is to determine where the best placement is for an ad to reach potential customers based very comply on the optimal combination of media cost and audience reach. Media agencies use extremely powerful software systems and data to be able to continually optimise the balance between these factors.
Trading Desks — These are the departments within Media Agencies that use every tool at their disposal to ensure optimal ROAS for brands. These teams also use DSPs and the data from proprietary and third-party suppliers to deliver as much value (and then some) for their clients.
Measurement/Analytics — The broadest of all the Programmatic media supply-chain elements due to the amount of measurement available to marketers and media agencies depending on technology platforms such as mobile or desktop or audience attributes based on first, second, or third-party data. Mobile Measurement Platforms (MMPs) and other systems such as Google Analytics, Salesforce or Adobe Marketing Cloud provide insight and value via this data. Much of this data will also flow through DMPs as currency for DSPs and SSPs.
Verification — As the name suggests, these are systems that check and verify that an ad was actually displayed where it was supposed to in order to reach the intended audience. The lack of transparency in the programmatic media space has brought into question the validity of verification with a number of brands having their ads displayed in very inappropriate locations online.
Ad Servers — These are the systems used by Publishers (websites) to show an advertisement to an audience based on target attributes. These target attributes are determined and optimised by the Trading Desks to ensure the right ad is presented to the right audience — not necessarily on the right website.
Ad Networks — As the name suggests, a network of Publishers where the aggregated volume of audience reach and costs are far simpler to understand and trade. These networks also allow the grouping of Publisher platforms that enables Trading Desks to buy media more efficiently based on scale of audience or specific attributes such as location or demographics.
DSPs — Demand Side Platforms are the systems that the Media Agencies use in their Trading Desks to buy and optimise programmatic media based on specific audience attributes or cost thresholds or a combination of these. These systems are often automated to keep costs down and ensure 24x7 optimisation of programmatic media buying.
SSPs— For a market to exist, demand must be complemented by supply. The Supply Side Platforms are the systems that use the data from the Ad Networks to present and market Publisher inventory for purchase via the DSPs by the Media Agency Trading Desks.
Ad Exchanges — Ad Exchanges are a collective of Ad Networks and facilitate the buying and selling of Publisher inventory simultaneously. Like the share market, Ad Exchanges enable what’s known as Real-Time Bidding (RTB) for audiences via the automated DSP and SSP systems.
DMPs — Data Management Platforms are the software systems that collect first, second, and third-party data and organises it to help brands and marketers get better marketing results for their media-spend. DMPs ingest data from a very wide variety of sources and feed this data into the DSPs and SSPs to allow even more sophisticated optimisation of the programmatic buying and selling of media. You sometimes heat DMPs referred to as “Data Lakes” and “Data Stores”.
DMPs would be the systems that would first feel the impact of the LAT and Ad Personalisation changes by Apple and Google.