09 April 2021

Privacy-First Changes Have Far-Reaching Commerce Platform Implications

Phillip Jackson, Chief Commerce Officer
Content / Technology

With keen interest I read Common Thread’s excellent post, Apple iOS 14 and Facebook: What Ecommerce Brands Need to Know About IDFA, ATT, and the SKAd Network. There’s a lot of good information in this post and I encourage you to read it.

What is at Stake?

Essentially, Apple and Facebook have declared war on one another. For its part, Apple has decided to take a stance on privacy, calling it a fundamental human right and using that stance to differentiate itself from all other tech giants. Recently the company released an ebook, A Day in the Life of Your Data: A Father and Daughter Day at the Playground, that explains in plain English just how extensive personal data collection has become.


For its part, Facebook has declared itself to be the champion of the small and medium entrepreneurs, taking out full page ads that declare it is, “standing up to Apple for small businesses everywhere.” With 10 million small businesses relying on its platform to reach and engage customers, Facebook warns that Apple’s new privacy updates will be devastating to this critical sector of our economy.


So it’s war; and as is the case with all wars, there are thousands of nuances and miffed feelings. Still this war can be boiled down to: Apple claims that the complex ecosystem websites, app developers, data aggregators and ad tech companies know too much about individual consumers because they track their every move. Facebook contends that it’s tracking is a vital resource to small businesses, many of whom might very well be the next GE or Amazon. Is it fair to stifle that entrepreneurship?

What Changed?

In late January, Apple announced some iOS 14 updates that are designed to offer users more stringent privacy protection. One of its features, App Tracking Transparency (ATT), will, “require apps to get the user’s permission before tracking their data across apps or websites owned by other companies. Under Settings, users will be able to see which apps have requested permission to track, and make changes as they see fit.”


The initial announcement said the feature would roll out in the spring, but its launch was moved up, which small and medium sized businesses discovered, much to their dismay.


Tracking is vital to attribution, and attribution is vital to marketing spend. Businesses, particularly small ones that have smaller marketing budgets, want to know which channels deliver the most bang for their buck in terms of conversions. Buying in the wrong channel, one that doesn’t yield new customers, can literally put a business’s survival at risk.


Facebook operates two of the largest social media sites in the world, and it’s ad platform, Facebook Exchange, is one of the largest markets in the world (in 2020 advertisers spent $2.6 billion dollars on the exchange). A great many of the advertisers, in fact, are small businesses.


Facebook also allows its advertisers to track users who see or respond to an ad on its site as they go about their digital lives. If I click on a Helly Hansen parka ad on Instagram, and then five days later convert, Helly Hansen will know that Instagram helped inform my decision in some way. More importantly, the brand will know that the Instagram ad is money well spent.


Apple put an end to that tracking once the iOS 14 App Tracking Transparency feature when live. Now Facebook -- or any other social media or news site, for that matter -- can’t track users who don’t opt in on their phones first (see image below). If Hally Hansen wants to track me I must navigate to my settings tab and tell Apple I’m okay with that. 


The pain that small businesses are feeling as a result of this change is real, which we are witnessing first hand at Rightpoint. Overnight our clients can no longer attribute sales to marketing efforts in their sales and analytics reports.


As the Common Threat points out, brands don’t have a lot of input into how consumers make decisions on their tracking permissions. That decision is made within Apple, and brands have no ability to inform the message, language or workflow.

The Havocs of War

And that removal is having a direct impact on the consumer’s decision to opt in to tracking. As Common Thread points out, we’ve been around this block before:

 

When a similar prompt was introduced by iOS 13 regarding geographic information, opt-in rates to allow sharing “with apps when they’re not in use” plummeted from 100% to below 50%.”

 

Facebook agrees with Common Thread’s concerns, stating “In testing we’ve seen more than a 50% drop in Audience Network publisher revenue”; and, “Our studies show, without personalized ads powered by their own data, small businesses could see a cut of over 60% of website sales from ads.”

Collateral Damage

Facebook offered a fix to this challenge by rolling out a new pixel architecture but most of the major ecommerce platforms weren’t ready for it, leading to painful ramifications to brands. Changing the backend to accommodate the new pixel can be costly, and in the case of Magento, the site owner needs to rely on a third-party Facebook plug-in from Mageplaza or something similar. These plug-ins haven’t been vetted by Magento, or Rightpoint, so are they up to snuff? Do they pose any security risks? We just don’t know the answers yet. 

 

As Common Thread advises, ecommerce sites can work around the Apple’s App Tracking Transparency by verifying their domain in Facebook business manager, which will “ensure they have authority to configure the conversion events tracked on their domains.” In other words, by verifying a domain on Facebook, the site owner has first party-like privileges, and can track a more restricted set of conversion events. But again, while this is doable, it’s not that easy for the typical business to implement, especially if their platform isn’t SaaS and changing the backend is difficult.

 

The other challenge facing site owners is the escalating cost of customer acquisition campaigns. Up until iOS 14, the costs of acquiring new customers was plummeting, thanks largely to hyper targeting capabilities. Now that those capabilities are curtailed, CAC costs are on the rise. This leaves emerging brands with few options, as organic search is extremely crowded, and organic social is more or less non-existent as the algorithms no longer favor it, especially if it leads to an external site. This is a very worrying development for site owners.

 

Consumers too are collateral damage. I realize that their interests are supposed to be on the forefront of all privacy initiatives, but consumers are multifaceted. Yes, they don’t want their photo storage app to use their images to build a facial recognition database, but they also want the ability to discover new products and brands, and most of those opportunities are the direct result of targeted advertising. This discovery spigot has been shut off to some degree.

 

Whenever a giant tech company opts to take a stance or go to war with one of its perceived foes there’s always collateral damage. We live in a highly interconnected world, and there are big ramifications to such changes. 

Are the Consumer’s Interests Truly Served?

While privacy initiatives are noble, one wonders: do they really serve the customers interests? Do they accomplish the goals they set out to do? About ten years ago, Microsoft rolled out a new privacy framework as part of Window Vista, but customers quickly fatigued from the popups and they defaulted to opting out of everything.

 

GDPR was supposed to enable consumers to decide how and when a site can use their data, but many sites don’t allow consumers access it without consenting. And even if a consumer decides to exercise his or her free choice, no one can make sense of the consent screens anyway. As a result, the consent button has become an annoyance to many consumers, just an extra step to get out of the way before they can fully use a site.

 

Will Apple’s App Tracking Transparency suffer a similar fate? Apple hopes that it will force a consumer to stop and think about what data the app tracks, and whether or not they’re okay with it. But will they grow tired of that request and say yes automatically? 

 

If yes, then Apple’s goal will not be achieved and the havocs of war many retailers are suffering from today will have been for nothing.