These are the companies that will win—or lose—from Apple’s impending user privacy change

Published Mon, Apr 12 20211:16 PM EDT

This spring, Apple is expected to roll out a change to its iOS 14 software that will grant users more privacy and disrupt the digital advertising ecosystem. This change will affect a unique device identifier on every iPhone and iPad called the IDFA or the "identifier for advertisers." Companies that sell mobile ads rely on this ID to target promotions to users and estimate their effectiveness. With the upcoming update to iOS 14, apps that want to track users will have to ask them to opt in. This change is expected to shake up digital advertising. Here are the companies that stand to win and lose. Big winner: Apple Apple is the clear-cut winner of its upcoming changes, as it's giving consumers more control over who can track their activity across their iPhones and iPads. For many users, that's a welcome change. From documentaries like "The Social Dilemma" to Facebook's 2018 Cambridge Analytica scandal and controversy over misinformation and targeted election ads , consumers are more aware about how their personal data is exploited. "If you play in Apple's ecosystem, you play by Apple's rules," said Daniel Newman, principal analyst at Futurum Research. "They're doing something that the world will largely see as good." The change will benefit Apple's business as well. Many companies rely on this tracking to target app installation ads. Often, these ads are found on Facebook and Snapchat. With less data available for targeting, analysts are expecting more ad dollars to shift toward Apple's App Store ads. Advertisers "already spend there, they already have success there, so if they have less of an ability to target the right users in other apps, they'll most likely double down on their ability to target people who are searching in the App Store," said Nicole Perrin, eMarketer principal analyst of digital advertising, at Insider Intelligence. Neutral impact: Google and Amazon Google may face minimal impact from Apple's privacy change. That's because the tech giant reaches users across numerous services, including search, Gmail, YouTube and Google Shopping. That means Google has a ton of first-party data it can use to personalize ads. "It won't surprise me if they're able to continue showing their advertisers that they're doing at least as well as anyone can do under the new situation," Perrin said. With its troves of first-party data, Amazon is in a similar position. It's usually the first stop for online shoppers. The e-commerce juggernaut also runs ads to users based on the keywords of their searches within its app. "Amazon knows what you actually buy because they sell it to you," Newman said. Losers: Facebook and Snap Facebook relies on a metric called view-through conversions to measure how often a user who sees an ad from a brand goes on to make a purchase from that brand. Device identifier tracking is critical to that measurement. Without it, the social media company and others will have to find other ways to measure the effectiveness of their ads. In August, Facebook acknowledged that Apple's upcoming iOS 14 could lead to a more than 50% drop in its Audience Network advertising business. Nearly all of Facebook's revenue comes from advertising, but its Audience Network contributes only a small portion of that—well less than 10% of the company's net revenue, a person familiar with the numbers told CNBC. "Their network beyond Facebook will be impacted, but they also ... have a good amount of first-party data," said Ron Josey, analyst at JMP Securities. That means Facebook is equipped to pivot its business. For instance, the company introduced new features that will allow Facebook and Instagram users to shop within the apps. This allows the social media giant to measure its ads' effectiveness for marketers. In March, Facebook CEO Mark Zuckerberg said that if more retailers sell directly through both social media apps, Apple's privacy change could be a boon for business in the long run. If you play in Apple's ecosystem, you play by Apple's rules. They're doing something that the world will largely see as good. principal analyst at Futurum Research Daniel Newman Snap is another company that is expected to take a hit. In its fourth-quarter earnings report, Snap chief financial officer Derek Andersen warned that the Apple iOS changes will present a risk of interruption to advertising demand in the period immediately after they are implemented. Though the long-term impact on Snap's business is unclear, analysts don't think the privacy change should affect the social media company for long. That's because the app engages with users frequently enough to generate the first-party data necessary to target ads. Further, Snap has said it intends to make a long-term push to bring more e-commerce and in-app purchases to Snapchat. Losers: Ad tech companies Many ad tech companies rely on tracking to deliver ads to the most relevant internet users. Losing that will make their jobs much harder. Advertising platform Criteo warned analysts in its fourth-quarter earnings call that looming privacy changes, including Apple's privacy update, could have an impact of about $60 million on its business in 2021. PubMatic , meanwhile, said in February that "there is uncertainty around the timing and size of impact from Apple's elimination of IDFA." Meanwhile, Unity Software told analysts in its fourth-quarter earnings call that it expects a $30 million, or 3%, reduction in revenue in 2021 as a result of Apple's change. But the companies are adapting. Criteo, for example, said it is preparing to use its own first-party data to target users. IDFA likely will not devastate any of these companies, but these companies will have to navigate past this challenge. Potential winners: Connected TV companies As Apple disrupts the mobile advertising ecosystem, some analysts say connected TV companies—those that deliver advertising via streaming services—may benefit from the change. That's because these companies don't rely on Apple's iOS tracking to deliver targeted ads to viewers. As more users shift their TV watching habits to streaming services, so too will follow ad dollars. In 2020, the U.S. market for connected TV ad spend was more than $9 billion, and that figure is expected to reach nearly $25 billion by 2024, according to eMarketer. Names that could benefit are Roku , Viant Technology and Magnite . Although The Trade Desk has said that 10% of its flow-through advertiser spend relies on IDFA, the ad tech company has also been building out its connected TV business and could benefit from this shift in ad budgets. Going forward, companies that want to operate in the digital advertising ecosystem will have to rely on first-party data to deliver the most personalized ads possible. "Depending on how the different participants adapt, innovate and invest, that is going to determine how well they're going to navigate these changes," said Daniel Flax, analyst at Neuberger Berman.

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This spring, Apple is expected to roll out a change to its iOS 14 software that will grant users more privacy and disrupt the digital advertising ecosystem.

This change will affect a unique device identifier on every iPhone and iPad called the IDFA or the "identifier for advertisers." Companies that sell mobile ads rely on this ID to target promotions to users and estimate their effectiveness.

With the upcoming update to iOS 14, apps that want to track users will have to ask them to opt in.

This change is expected to shake up digital advertising. Here are the companies that stand to win and lose.