Small businesses hit particularly hard when Apple made it easy to opt out of app tracking
If you regularly shop online, or even occasionally Google a product review, you’ve probably experienced app tracking. That’s the slightly creepy, sometimes useful technology that Meta, Google, TikTok and the like use to follow your clicks across apps and websites. The intel about your interests and purchases determines what kinds of ads they put in front of you and when. App tracking is the reason ads for Brooks running shoes you once Googled keep showing up, even after you’ve moved on to pie making videos on YouTube.
Consumers, for the most part, hate this. Since April 2021, when Apple started making apps and websites ask permission to track its device users, some 80% to 85% rejected it. For online ad platforms, the flow of data (anonymized, usually) for millions of potential customers went dark.
A paper forthcoming in Management Science by Northwestern’s Guy Aridor, Columbia’s Yeon-Koo Che, UCLA Anderson’s Brett Hollenbeck, Hamburg University’s Maximilian Kaiser and University of Maryland’s Daniel McCarthy estimates the economic costs of Apple’s App Tracking Transparency for Meta, Google and their advertisers. Its findings at once suggest that app tracking works — we buy a lot of stuff from companies that track us — and turning it off is devastating to some of those stalkers.
Small e-commerce businesses advertising on Meta were hit especially hard, according to the study.
As Apple customers blocked, revenue growth slowed for companies most dependent on Meta advertising. Those firms’ revenue growth declined 37% relative to Meta customers with more diverse advertising budgets, the study found. Small firms averaged about 60% of their traffic from this Meta product, compared with 30% for large firms. The magnitude of revenue growth damage suggests that the cost of starting a small e-commerce firm “is now substantially higher because of ATT,” the researchers write.
Google fared better and even gained some ad share from Meta. Changes in Apple’s performance were not evaluated. But the researchers note that unlike Meta, those two giants still have a lot of legal opportunities to continue chasing us around the internet.
Untraceable Sales
Before 2021, apps and websites had default access to click records on all Apple devices through “identifiers for advertisers.” IDFAs identify the specific device, but not the owner.
Today, most Apple users get a pop-up when they install a new (to them) app that wants to track. They can hide the IDFA by clicking on “ask app not to track.” Android users can block tracking, but it takes multiple, not very intuitive steps to do so. On most Androids, a trackable tag remains visible by default.
Historically, most ad campaigns on Meta and Google were optimized for “off-platform” conversions. (Conversions are clicks like purchases or signing up for texts that benefit the advertiser.) For example, Meta is paid to optimally place an ad for a dog toy on Instagram. If a user who sees the ad purchases the toy, Meta can use that data to target other users who are likely to also buy it.
Blocked from IDFAs, Meta can’t track that ultimate dog toy sale on Chewy back to Instagram. Meta’s ad targeting in general gets less precise because it’s no longer getting as much data on interests. It’s harder to know if that Instagram ad is hitting actual dog owners or just annoying a bunch of pet-less members.
Reductions in new customer orders drove the initial slowdowns in revenue growth, the study finds. That hit eventually depresses long-term sales by, for example, reducing the number of repeat customers, the researchers note.
In a separate measurement, the researchers found firms that historically collected a high percentage of revenue from sales on Apple devices saw revenue growth declines about 40% larger than firms that were much less Apple dependent.
Overall, Meta’s share of the online advertising market dropped by 4.4% after ATT, the study finds. The study didn’t analyze Google advertisers with the same detail as Meta’s. But it looks like Google picked up most of the business Meta lost.
You’re Still Being Tracked
ATT stopped only some device tracking. Meta, Google — most websites and apps — can see your clicks on their own platforms without an IDFA or Android equivalent.
For Meta, that mainly means they can follow you across Facebook, Instagram and WhatsApp. But Google has a much bigger universe; search, YouTube, Gmail, Maps, Home and Play, for example.
The study suggests that Google’s diverse offerings — so many places to continue tracking post-ATT — saved it from the abrupt declines in conversions that Meta experienced. Advertisers seemed to notice. Google advertising spending continued to increase as Meta’s dropped.
Featured Faculty
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Brett Hollenbeck
Assistant Professor of Marketing
About the Research
Aridor, G., Che, Y.K., Hollenbeck, B., Kaiser, M. and McCarthy, D. (in press). Evaluating the Impact of Privacy Regulation on E-commerce Firms: Evidence from Apple’sApp Tracking Transparency, Management Science.