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Apple’s iOS 14.5 — and the talk of the town, its accompanying privacy updates — are live. The changes offer consumers greater control over the use of their data, but at the same time introduce a new, significant number of identity resolution, ad targeting and ad measurement challenges for marketers. Below are the nitty gritty details.

Apple has officially released iOS 14.5, the much-anticipated operating system update that comes with a new privacy framework called App Tracking Transparency (ATT) intended to give users more agency over how their data is used and how their online activity is tracked.

The update — which arrives in the heat of a larger industries-wide reckoning on data privacy and online identity accelerated by the sunsetting of the third-party cookie and Google’s proposed privacy solution — offers a consent-based opt-in approach to allowing applications and third parties to track user behavior across different apps and sites.

While Apple has touted this as a victory for consumers, it is viewed as anything but for marketers. The ability to target audiences and measure the impact of their ad efforts is now severely impacted. And one of the biggest players in the ecosystem, Facebook, is now faced with a series of serious challenges.

ATT, explained

ATT shifts from the traditional framework of allowing users to opt-out of sharing their information to a consent-based opt-in model. On iOS 14.5, when a user launches an app, they are met with a pop-up notification prompting the user to either allow the app to share user data with third-party apps and sites or prohibit the app from doing so. The message reads: “Allow [app] to track your activity across other companies’ apps and websites?” Users must select “Ask App Not to Track” or “Allow.”

When users select “Allow,” apps are granted permission to embed trackers into their systems. These trackers collect and process user data and tie this information to a unique identifier, which, on Apple operating systems is known as the Identifier for Advertisers (IDFA). Then, when a user navigates to another app or site using the same adtech solution, targeted advertisements are served to that user based on their online activity. When users don’t allow a given app to track them, however, that app is barred from using those identifiers.

iOS 14.5 includes a number of additional updates outside of ATT; on the new system, users can unlock their devices via facial recognition while wearing masks, access more than 200 new emojis and direct Siri to play audio across other services besides Apple Music.

What does it mean for marketers?

Advertisers are now likely to lose access to large swaths of user data to which they previously had access. This poses significant targeting and measurement challenges.

Specifically, the updates are expected to create significant gaps in marketers’ ability to measure the degree to which their ad campaigns are actually working. Measuring attribution, or the specific instance responsible for converting a consumer, is especially complicated without user opt-in.

SKAdNetwork is Apple’s proposed answer to this problem, allowing “registered advertising networks to attribute app installations to a particular campaign by receiving a signed signal from Apple.” If a user opts out, SKAdNetword serves as an app-to-app tracking solution that provides last-touch attribution. But this data is only stored for 24 hours, making it challenging for marketers to apply or act on this information.

“For a lot of advertisers who rely heavily on those multi-touch attribution frameworks, this is going to impact them significantly from an operational standpoint,” says Jess Simpson, senior vice president of global identity and tech at Publicis Media. Simpson says the limitations of SKAdNetwork will impede the measurement of other metrics like frequency and reach. In response, major publishers and social networks may need to lean into more advanced modeling. “In the absence of data, you're going to have to use artificial intelligence and machine learning to power your products.”

The Facebook dilemma

Facebook may be especially ill-positioned to handle the changes, as ATT will hinder its ability to serve and measure personalized ads. If a user doesn’t consent to cross-app tracking, Facebook advertisers will have a difficult time targeting ads based on their unique activity across apps.

“It will be harder for all Facebook advertisers to associate performance with their ads, full stop,” says Josh McClauss, vice president of marketing at performance marketing agency Metric Theory. “Facebook has already prepared advertisers for this by eliminating insights into performance beyond seven days from a click, but now they’re going to lose even more insight.” It’s anticipated that Facebook could lose billions in ad spend (as the company itself claims that 50% of its advertising value lies in personalization).

After Apple’s initial announcement of iOS 14 last year, Facebook launched a campaign advocating against the updates, arguing that the changes would be especially detrimental to small businesses. The rollout of iOS 14.5 today will likely only exacerbate tensions between the two tech giants.

Todd Wooten, president and founder of ad buying and selling platform VRTCAL, however, notes that ATT could present Facebook with new opportunities, too. “Facebook has more first-party data available than most,” he says. “As a publisher, Facebook sits in the better position on the advertising side of its antitrust issues. There is a likely possibility that current privacy and antitrust [regulations and policies] can be a long-term benefit to Facebook because it is primarily a publisher. If Facebook embraces cohort targeting and applies standards to be established by the Interactive Advertising Bureau, it will benefit from the ‘anonymous moment’ cohort targeting that our digital advertising is evolving toward.” Wooten is of course referring to the decision by Google and others to introduce new cohort-based identity solutions that maintain user privacy in response to the demise of the third-party cookie.

It’s worth noting that Google, too, will be impacted. However, Apple and Google have a close relationship. Google pays Apple up to $12 billion per year to be the preferred search partner on its devices.

Forget the workarounds — the consumer is in control

iOS 14.5 had been available in a beta version to developers for more than two months before today. While the official rollout has been highly anticipated, marketers and developers are still scrambling to determine how they will be able to successfully serve targeted ads and measure their effect.

A number of apps are already attempting to circumvent ATT’s new requirements. Apple has been able to successfully shut down some such efforts, including an SDK from Adjust, which tried to introduce a unique user identifier of its own to forgo IDFA altogether. However, many more companies are bound to get creative with their own fingerprinting tactics in order to retain the ability to track users without their consent. Developers and marketers should beware: Apple is likely to crack down if the problem becomes widespread, per experts.

Not everyone views the changes as inherently threatening to marketers, though. “Everyone's looking at this as the great reset where consumers really are in the driver's seat,” says Publicis Media’s Simpson. “And it's less about looking at a privacy-first business model as something that you have to do and leaning into it as something you are allowed to do. You can set it up in such a way that gives you a foundation to provide some value that you can monetize against — because the advertiser is no longer in control; the consumer gets to decide how and when and where their data is used.”