Unsurprisingly, iOS users are opting not to be tracked which has led to an exodus of marketing money from iOS which does not appear to be going to Android but instead returning to where it came from.
Data from Branch Metrics Inc. indicates that less than 33% of iOS users agree to be tracked which far higher than I would have expected.
This is because iOS users are given no incentive by the owners of the apps and services to consent to tracking.
I have long been of the opinion that the best way to get around this problem for app and service owners who depend on advertising revenues is to require tracking consent to gain access to the content or service that they are providing.
This is how it is done on the web where many websites require the ad blocker to be disabled in order to access the content and this works quite effectively.
However, for whatever reason add developers have yet to take this step and I suspect that they will go down this route as the impact on their revenues becomes clearer.
The result of a user declining to be tracked is twofold in that the targeting is much less accurate and there is much less feedback in terms of how effective the campaign has been.
This makes advertising on iOS less effective than marketing to PC users and only slightly better than the traditional routes of TV, broadcast radio, and so on.
This has played out in the numbers which have been observed over the last few weeks as:
First, advertising on iOS: which has fallen by around 33% during the month of June according to as-measurement company Tenjin Inc.
- Companies like Google and Facebook derive approximately half or just over half of their mobile revenues from iOS devices.
- Hence, this corresponds to a loss of 16.5% of total mobile advertising spending on mobile phones in the USA.
Second, advertising on Android: which at the same time has increased by 10% according to Tenjin Inc.
- Assuming that Android accounts for the other 50% of mobile advertising spending, this corresponds to a total increase of just 5% points of the total advertising spend.
Hence, it looks like spending on advertising on mobile devices has taken an 11.5% hit over the last month in aggregate.
This makes complete sense because Android users are much less attractive to advertisers as they tend to come from a lower demographic and therefore have less money to spend.
I don’t think that this spending has disappeared but instead has been reallocated to other channels like PC, TV, radio, and so on.
Critically, this spending will no longer be available to the big tech platforms that utilise advertising for monetisation of which the big three are Google, Facebook, and Twitter.
Facebook has been the most critical of the change implemented by Apple and so it is logical to assume that it will be the most impacted in terms of marketing spend by advertisers.
This makes sense as Google still has substantial revenues from the PC (that Facebook does not) and so it may well recapture some of the revenue lost from iOS.
However, with an 11.5% decline in spending indicated on mobile devices, there could easily be disappointment when these companies next speak to the market.
The real impact will be felt in Q3 2021, but they may allude to it when they discuss the Q3 2021 outlook having reported Q2 2021.
This highlights just how skewed the risk profile of the FAANG names remains towards the downside.
This means more of what we saw in Q1 2021 where a large beat compared to expectations results in a small rally while a small miss is punished with a large correction.
I would not want to be holding these names when this change is reflected in real numbers.